A firm will earn normal profits when price:

Question

Quizplus · Accepted Answer

Normal profits occur when a firm is earning enough revenue to cover all its costs, including its opportunity costs. This means that the firm's economic profit is zero, and it is earning enough to cover its normal, or accounting, profit. In other words, the firm is earning enough to cover its average total cost, which includes both variable and fixed costs. Therefore, normal profits occur when price equals average total cost (ATC).

A Firm Will Earn Normal Profits When Price