If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then
A)the selling price for this firm is above the market equilibrium price.
B)new firms will enter this market.
C)some existing firms in this market will leave.
D)there must be price fixing by the industry's firms.

Question

Quizplus · Accepted Answer

In a purely competitive market, if a firm is earning an economic profit, it signals to potential new entrants that there are opportunities for profit. This will attract new firms to the market, increasing supply and driving down prices until economic profits are eliminated, restoring equilibrium.

If a Purely Competitive Firm Is Producing at the MR