In the graph below at P*, the firm is making __________ economic profits.

Question

Quizplus · Accepted Answer

At P*, the firm is producing at the point where Marginal Cost (MC) equals Marginal Revenue (MR), which is also the intersection of the Marginal Cost (MC) and Average Total Cost (ATC) curves. This means that the firm is making normal profits, but not economic profits, as its total revenue is just enough to cover all its costs, including opportunity costs. Therefore, the answer is negative, indicating that the firm is not earning any economic profits.

In the Graph Below at P*, the Firm Is Making