A firm enjoys a positive economic profit when:
A)the demand curve touches the average cost curve at the profit maximizing level of output.
B)the marginal revenue curve has a negative intercept in the ordinate axis.
C)the average revenue curve lies below the average cost curve at the profit maximizing level of output.
D)the marginal cost is declining at the profit maximizing level of output.
E)the average revenue curve lies above the average cost curve at the profit maximizing level of output.

Question

Quizplus · Accepted Answer

A firm enjoys a positive economic profit when its average revenue (AR) is greater than its average cost (AC) at the profit maximizing level of output. This is because the difference between AR and AC represents the firm's profit per unit of output. Option E states that AR is above AC at the profit maximizing level of output, which is consistent with a positive economic profit.

A Firm Enjoys a Positive Economic Profit When