Figure 10.12
-Refer to Figure 10.12.The firm represented in the diagram
A)makes zero economic profit.
B)makes zero accounting profit.
C)should exit the industry.
D)should expand its output to take advantage of economies of scale.

Question

Figure 10.12 
-Refer to Figure 10.12.The firm represented in the diagram
A)makes zero economic profit. 
B)makes zero accounting profit. 
C)should exit the industry. 
D)should expand its output to take advantage of economies of scale.

Quizplus · Accepted Answer

The intersection of the firm's average total cost (ATC) and price (P) occurs at the point where the firm's output is producing at the minimum efficient scale. At this point, the firm is making normal profit, meaning it is covering all its costs (including opportunity costs) but is not making an economic profit. Therefore, the correct answer is A, the firm makes zero economic profit.

Figure 10.12 -Refer to Figure 10.12.The Firm Represented in the Diagram