In a perfectly competitive market, if price is less than average total cost, but greater than average variable cost at the level of output where marginal cost equals marginal revenue

Question

Quizplus · Accepted Answer

In this scenario, the firm is covering its average variable costs but not its average total costs, which means it is not covering all of its fixed and variable costs. This results in a negative economic profit, as the price does not cover the total cost of production.

In a Perfectly Competitive Market, If Price Is Less Than