Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?
A)Pa
B)Pb
C)Pc
D)Pd

Question

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?
A)Pa 
B)Pb 
C)Pc 
D)Pd

Quizplus · Accepted Answer

In the short run, a firm will earn zero economic profits when the price is equal to its average total cost (ATC) at the profit-maximizing output level. Looking at the graph, the ATC curve intersects with the demand curve at point B. Therefore, the price corresponding to zero economic profit for this firm is Pb.

Figure 14-2 Suppose a Firm Operating in a Competitive Market Has the Has