If a perfectly competitive firm in the short run is producing where P = ATC = MC,this firm is
A)at its profit-maximizing output level.
B)obliged to shut down.
C)on the downward-sloping portion of its demand curve.
D)earning economic profits.
E)incurring losses.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the profit-maximizing output level is where P=MC, and in the short run, firms can still make profits as long as the price is greater than or equal to the average total cost (P≥ATC). Therefore, when a perfectly competitive firm is producing where P=ATC=MC, it is both producing at its profit-maximizing output level and earning economic profits.

If a Perfectly Competitive Firm in the Short Run Is