Consider a firm operating where P = 10, MR = 10, MC = 10 and ATC = 10 (and there is no fixed cost). This firm is:
A) making an economic profit of 10.
B) an example of monopolistic competition.
C) going to go out of business in the long run.
D) perfectly competitive in long-run equilibrium.

Question

Quizplus · Accepted Answer

In long-run equilibrium under perfect competition, firms will earn zero economic profit, and produce where P = MC = ATC. This is exactly the case in the given scenario, where P = MR = MC = ATC = 10. Therefore, the firm is perfectly competitive in long-run equilibrium.

Consider a Firm Operating Where P = 10, MR =