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

When a firm's marginal cost (MC) exceeds its average total cost (ATC), it indicates that the firm is producing at a level where it is making an economic profit, as the price is above the ATC.

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