When economic profits are zero for a firm in a perfectly competitive market,it means that:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot influence the market price. Therefore, they must produce at the lowest possible cost, which is where minimum average total cost occurs. When economic profits are zero, price is equal to minimum average total cost. Thus, option B is the correct choice. Options A and C are not necessarily true as they only refer to cost-related variables and do not directly address the relationship between price and profit. Option D is incorrect because while A and C may be true, it does not necessarily follow that both are true at the same time, and neither directly address the relationship between price and profit.

When Economic Profits Are Zero for a Firm in a Perfectly