A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Question

Quizplus · Accepted Answer

True. In perfect competition, a firm will produce at the point where its marginal cost equals the market price. This also happens to be where the average total cost is at its minimum. So, at this price point, the firm will break even, making zero economic profit. If the price is any lower, the firm will incur losses, and if the price is any higher, other firms will enter the market, driving down the price and reducing profits.

A Perfectly Competitive Firm Breaks Even at a Price Equal