Reference: Ref 11-8 (Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which of the panels shows a competitive firm making zero economic profits?
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Question

Reference: Ref 11-8 (Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which of the panels shows a competitive firm making zero economic profits?
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Quizplus · Accepted Answer

In panel B, the average total cost (ATC) curve intersects the demand (D) curve at the minimum point of ATC, which means the firm is making normal profits and thus zero economic profits. In panel A, the ATC curve is above the demand curve, indicating the firm is making losses. In panel C, the ATC curve is below the demand curve, implying the firm is making positive economic profits. In panel D, the ATC curve is tangent to the demand curve at a quantity lower than the profit-maximizing quantity, which means the firm is making positive profits, but not at the maximum level.

Reference: Ref 11-8 (Figure: Profits and Competitive Firms) Refer to the Four