If the market price is above a firm's average cost at the quantity produced,

Question

Quizplus · Accepted Answer

If the market price is above a firm's average cost at the quantity produced, the firm will make a profit. This is because the revenue generated from selling the product is higher than the cost of producing it. Even if the economic profit is zero, the firm is still making a profit that covers its costs and allows it to continue operating. The market price of the firm's inputs may or may not rise, but this does not affect the fact that the firm is making a profit. Maximizing total profit would require the firm to continue producing as long as the marginal revenue is greater than the marginal cost, which is the same condition that leads to the firm making a profit.

If the Market Price Is Above a Firm's Average Cost