If a perfectly competitive firm produces that output level where average total cost equals price, the firm realizes
A) economic losses
B) economic profits
C) monopoly profits
D) normal profits

Question

Quizplus · Accepted Answer

In a perfectly competitive market, when a firm produces at an output level where average total cost equals price, it is covering all its costs, including the opportunity cost of capital, which means it is earning normal profits, not economic losses or profits. Monopoly profits are not relevant in this context since the firm is in a perfectly competitive market.

If a Perfectly Competitive Firm Produces That Output Level Where