If the representative firm in a purely competitive industry is in short-run equilibrium and, at its current output level, its marginal cost exceeds its average total cost, then we can conclude that
A) the firm is suffering economic losses.
B) the firm is not maximizing profits in the short run.
C) some firms will exit the industry in the long run.
D) other firms will enter the industry in the long run.

Question

Quizplus · Accepted Answer

When marginal cost exceeds average total cost, the firm is making an economic profit, which attracts new firms to enter the industry in the long run.

If the Representative Firm in a Purely Competitive Industry Is