Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-3. The firm will earn positive economic profit if the market price is
A)positive.
B)$6.
C)above $6.
D)There is no price at which the firm earns positive economic profits.

Question

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. The firm will earn positive economic profit if the market price is
A)positive. 
B)$6. 
C)above $6. 
D)There is no price at which the firm earns positive economic profits.

Quizplus · Accepted Answer

At a market price above $6, the firm's marginal revenue exceeds its average total cost, indicating that the firm is earning positive economic profits. At a market price of $6, the firm is only breaking even as its average total cost and marginal revenue are equal. At a market price below $6, the firm is experiencing losses as its average total cost exceeds its marginal revenue. Therefore, the best choice is C, above $6.

Figure 14-3 Suppose a Firm Operating in a Competitive Market Has the Has