Asked by Ashley Kenny on Jun 19, 2024
Verified
If a firm is making a short-run economic profit,
A) price = AFC.
B) price = ATC.
C) price is greater than average total cost.
D) price is less than average variable cost.
Short-Run Economic Profit
The profit earned by a firm in the short term, potentially including both actual financial gains and opportunity costs.
Average Total Cost
The total cost of production divided by the quantity of output produced; a measure of per-unit cost.
Price
The amount of money required to purchase a good or service, determined by various factors including supply and demand.
- Understand the significance of price, average total cost, and marginal cost in determining a firm's profitability.
Verified Answer
NH
Nguy?n HoàngJun 24, 2024
Final Answer :
C
Explanation :
If a firm is making a short-run economic profit, it means that its total revenue (price times quantity) is greater than its average total cost, including both fixed and variable costs. Therefore, the firm's price is higher than its average total cost. Thus, the correct option is C).
Learning Objectives
- Understand the significance of price, average total cost, and marginal cost in determining a firm's profitability.