If price is set equal to marginal cost when marginal cost is below ATC, the firm will receive a profit greater than profit earned when marginal cost is above ATC.

Question

Quizplus · Accepted Answer

When price is set equal to marginal cost and marginal cost is below average total cost (ATC), the firm incurs a loss because it cannot cover its total costs. Profit is only possible when price is above ATC.

If Price Is Set Equal to Marginal Cost When Marginal