If a competitive firm is in short-run equilibrium,then
A) economic profits equal zero.
B) economic profits will be positive.
C) economic profits will be negative.
D) All of the above are possible in the short run.

Question

Quizplus · Accepted Answer

All of the above are possible in the short run. It depends on the market conditions and the specific cost and revenue structure of the firm. If the market price is higher than the average variable cost, the firm can earn positive economic profits. If the price is lower than average total cost, the firm will incur losses and have negative economic profits. If the price is equal to average total cost, the firm will break even and earn zero economic profits.

If a Competitive Firm Is in Short-Run Equilibrium,then