In the short run,which of the following would indicate that a perfectly competitive firm is producing an output for which it is receiving a normal profit? A)P AC B)AVC

Question

In the short run,which of the following would indicate that a perfectly competitive firm is producing an output for which it is receiving a normal profit?
A)P > AC
B)AVC < P < AC
C)P = AC
D)P = AVC

Quizplus · Accepted Answer

A normal profit occurs when P=AC, meaning that the firm is covering all of its costs including both fixed and variable costs. If P>AC, the firm is earning an economic profit, while if P<AC, the firm is experiencing a loss. If P=AVC, the firm is covering just its variable costs and is experiencing a shutdown point. Therefore, the only option that indicates a normal profit is C, where P=AC.

In the Short Run,which of the Following Would Indicate That