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.

Question

Quizplus · Accepted Answer

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.

A Purely Competitive Firm Is Currently in Short-Run Equilibrium and Its