Suppose that Pumice Motor Company has total revenue of $800,000, fixed costs of $200,000, and variable costs of $600,000. If Pumice Motor company is known to be in a perfectly competitive market, which of the following is true?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, long-run equilibrium occurs when firms are earning zero economic profit, which happens when total revenue equals total costs (fixed costs + variable costs). Here, Pumice Motor Company's total revenue ($800,000) equals its total costs ($200,000 fixed + $600,000 variable), indicating it is in long-run equilibrium.

Suppose That Pumice Motor Company Has Total Revenue of $800,000