Figure 13-1
Suppose that a firm in a competitive market has the following cost curves:
-Refer to Figure 13-1.The firm will earn a positive economic profit in the short run if the market price is

Question

Figure 13-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 13-1.The firm will earn a positive economic profit in the short run if the market price is

Quizplus · Accepted Answer

In the short run, a firm will earn a positive economic profit if the market price is greater than the firm's average total cost at the profit-maximizing output level, which occurs where marginal cost equals marginal revenue. In this case, the profit-maximizing output level is where MC = MR = P = $6.30, and the corresponding ATC is $4.50. Thus, if the market price is above $6.30, the firm will earn a positive economic profit equal to the difference between the price and average total cost at the profit-maximizing output level.

Figure 13-1 Suppose That a Firm in a Competitive Market Has the Has