-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 ATC?,each produce 30 units,and the market price of the good is $16 per unit,then the firms
A) make zero economic profit and firms neither enter nor exit the industry.
B) make zero economic profit and so some firms exit the industry.
C) incur an economic loss and so some firms exit the industry.
D) incur an economic loss and so new firms enter the industry.
E) make an economic profit and new firms enter the industry.

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 ATC?,each produce 30 units,and the market price of the good is $16 per unit,then the firms
A) make zero economic profit and firms neither enter nor exit the industry. 
B) make zero economic profit and so some firms exit the industry. 
C) incur an economic loss and so some firms exit the industry. 
D) incur an economic loss and so new firms enter the industry. 
E) make an economic profit and new firms enter the industry.

Quizplus · Accepted Answer

In a perfectly competitive market, when firms are producing at a point where the price equals the average total cost (ATC), they are making zero economic profit. This situation leads to no incentive for firms to enter or exit the industry, as they are covering all their costs, including the opportunity cost of capital.

-The Above Figure Shows Three Possible Average Total Cost Curves