If a perfectly competitive firm is currently producing where P = MC and MC = ATC, then the firm will earn ________ profits.
A) positive
B) zero
C) negative
D) above normal

Question

Quizplus · Accepted Answer

When a firm in perfect competition is producing at a point where Price (P) equals Marginal Cost (MC) and MC equals Average Total Cost (ATC), the firm is operating at the most efficient scale. At this point, the price it receives for its product is equal to its average total cost of production, meaning it covers all its costs, including a normal profit, but does not earn any economic (above normal) profits. Thus, the firm earns zero economic profits.

If a Perfectly Competitive Firm Is Currently Producing Where P