Asked by Abigail Orozco on Jun 10, 2024
Verified
A purely competitive firm is currently in short-run equilibrium and its MC exceeds its ATC at its current output level. It can be concluded that
A) firms will leave the industry in the long run.
B) the firm is realizing an economic profit.
C) the firm is suffering an economic loss.
D) the firm will shut down in the short run.
Short-Run Equilibrium
A state in a market or economy where supply and demand are balanced but can change due to short-term fluctuations.
Economic Profit
The separation between a company's complete financial intake and its aggregate financial obligations, incorporating both definite and subtle costs.
- Determine the economic profit or loss by analyzing cost data and market prices.
Verified Answer
JH
Jason HanceJun 13, 2024
Final Answer :
B
Explanation :
If a firm's marginal cost (MC) exceeds its average total cost (ATC) at its current output level, it means that the additional cost of producing one more unit is higher than the average cost of production. This situation indicates that the firm is operating efficiently and is likely selling its product at a price that is higher than its average total cost, thus realizing an economic profit.
Learning Objectives
- Determine the economic profit or loss by analyzing cost data and market prices.
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