Zero economic profit earned by firms in a perfectly competitive market indicates that:
A. firms will exist in the long run.
B. Total revenue covers all variable cost of production exactly.
C.P= AC
D. MR less than AR
The correct option is C. P = AC
The market is in a long-running equilibrium, where all companies produce zero level economic profits at the output level of P = MR = MC and P = AC. No firm is encouraged to enter or leave the market.
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