Figure 14-1
-Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

Question

Figure 14-1 
-Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

Quizplus · Accepted Answer

In a perfectly competitive market, firms will earn positive economic profits in the short run if the market price (P1 in this case) is above their average total cost (ATC) curve at the quantity they are producing. At P1 in the graph, the firm's ATC curve intersects with the market price above the firm's marginal cost curve, allowing the firm to earn positive economic profits in the short run. It's important to note that in the long run, new firms may enter the market, increasing competition and driving down the market price, causing economic profits to eventually return to zero.

Figure 14-1 -Refer to Figure 14-1.Which of the Four Prices Corresponds to Prices