-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC1,each produce 30 units,and the market price of the good is $16 per unit,then the firms
A)make zero economic profit and new firms enter the market.
B)make zero economic profit and no firms enter or exit the market.
C)make zero economic profit and some firms exit the market.
D)incur an economic loss and some firms exit the market.
E)make an economic profit and new firms enter the market.

Question

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC1,each produce 30 units,and the market price of the good is $16 per unit,then the firms
A)make zero economic profit and new firms enter the market. 
B)make zero economic profit and no firms enter or exit the market. 
C)make zero economic profit and some firms exit the market. 
D)incur an economic loss and some firms exit the market. 
E)make an economic profit and new firms enter the market.

Quizplus · Accepted Answer

In a perfectly competitive market, firms make zero economic profit when the market price equals the minimum point of the average total cost curve. If the market price is $16 and firms are producing at this price, they are covering all their costs, including opportunity costs, resulting in zero economic profit. Therefore, no firms will enter or exit the market.

-The Above Figure Shows Three Possible Average Total Cost Curves