If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output
A) marginal revenue is less than price.
B) marginal revenue exceeds ATC.
C) ATC is being minimized.
D) total revenue equals total cost.

Question

Quizplus · Accepted Answer

In a purely competitive market, a firm will produce at the point where marginal cost (MC) equals price (P). If the firm is realizing an economic profit, that means the price is higher than the average total cost (ATC). Therefore, at this output level, marginal revenue (MR) must exceed ATC for the firm to earn a profit. Hence, choice B is correct as MR > ATC.

If a Purely Competitive Firm Is Producing at the P