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In the long-run, the profit-maximizing/loss-minimizing firm in a competitive price-taker market will have Price equal to (P=_____): a
In the long-run, the profit-maximizing/loss-minimizing firm in a competitive price-taker market will have Price equal to (P=_____):
a. Average Fixed Cost (AFC) and economic profits are equal to zero,
b. Average Variable Cost (AVC) and economic profits are greater than zero,
c. Average Total Cost (ATC) and economic profits are equal to zero,
d. Average Variable Cost (AVC) and economic profits are equal to zero,
e. Average Total Cost (ATC) and economic profits are greater than zero.
Expert Solution
- In the long-run, the profit-maximizing/loss-minimizing firm in a competitive price-taker market will have Price equal to (P = c. Average Total Cost (ATC) and economic profits are equal to zero) .
To determine the profit situation of a firm, we compare the price and the average total cost. In the long run, firms in perfectly competitive markets make zero economic profits. When the firms are making zero economic profits, the price is equal to the average total cost.
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