Assume that a firm is producing an output level such that marginal revenue equals marginal cost. One can correctly conclude that the firm is earning a normal profit.

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Quizplus · Accepted Answer

Marginal revenue equaling marginal cost is a condition for profit maximization, not necessarily an indication that the firm is earning a normal profit. Normal profit is the minimum profit necessary for a company to remain competitive in the market and is considered a component of the firm's opportunity costs. A firm can be maximizing profit (where MR=MC) and still earn economic profits above normal profit or incur losses.

Assume That a Firm Is Producing an Output Level Such