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Answer to Question #3751 in Macroeconomics for Tara
Question #3751
If the perfectly competitive firm is producing an output level at which price equals marginal cost. Isis
(a) earning profits
(b) taking losses
(c) earning normal profit
(d) there is not enough information to answer this question.
& I think it is earning zero economic profit but that is not an option here.
(a) earning profits
(b) taking losses
(c) earning normal profit
(d) there is not enough information to answer this question.
& I think it is earning zero economic profit but that is not an option here.
Expert's answer
Answer: d
Explanation:
P=MC (Marginal cost) is a condition of equilibrium for perfectly competitive firm, but profits and losses are defined by ATC (average total cost), not marginal costs.
As an example, below are shown possible profit outcomes in the short run period (but in long run period the profit really equals zero).
Explanation:
P=MC (Marginal cost) is a condition of equilibrium for perfectly competitive firm, but profits and losses are defined by ATC (average total cost), not marginal costs.
As an example, below are shown possible profit outcomes in the short run period (but in long run period the profit really equals zero).
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