-The above figure shows a perfectly competitive firm.If the market price is $15,the firm
A) is incurring an economic loss.
B) is making an economic profit.
C) is making zero economic profit.
D) will immediately shut down.
E) might shut down but more information is needed about the AVC.

Question

-The above figure shows a perfectly competitive firm.If the market price is $15,the firm
A) is incurring an economic loss. 
B) is making an economic profit. 
C) is making zero economic profit. 
D) will immediately shut down. 
E) might shut down but more information is needed about the AVC.

Quizplus · Accepted Answer

When the market price is above a firm's average total cost (ATC), the firm is making an economic profit. Since the question implies a price of $15, which is above the firm's ATC at its profit-maximizing output, the firm is making an economic profit.

-The Above Figure Shows a Perfectly Competitive Firm