If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then
A)marginal revenue is less than price.
B)average total cost is at a minimum.
C)total revenue equals total cost.
D)price exceeds average total cost.

Question

Quizplus · Accepted Answer

If price equals marginal cost, then the firm is producing at the efficient level of output where it is maximizing its profit. If the firm is earning an economic profit, then price must be greater than average total cost, hence choice D is correct. Choices A, B, and C are incorrect as they do not necessarily hold true in this scenario.

If Price = Marginal Cost at the Output Produced by a Perfectly