If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

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Quizplus · Accepted Answer

When firms are producing at a level where price exceeds average total cost, they are earning economic profits because they are covering all their costs, including both explicit (accounting costs) and implicit (opportunity costs). This scenario indicates that the firm is doing better than its next best alternative, hence earning economic profits.

If Firms Are Producing at a Profit-Maximizing Level of Output