Asked by Michelle Uzoukwu on Jul 24, 2024
Verified
Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.
Marginal Revenue
The boost in income achieved by selling one more unit of a product or service.
Marginal Cost
The growth in aggregate expenditure brought about by generating an extra unit of a product or service.
Economic Profit
The difference between total revenue and total costs, where costs include both explicit and implicit costs.
- Expound on the decision-making protocol for entities operating within perfectly competitive markets in relation to production and operating decisions.
- Ascertain and detail the entire financial income and profitability employing delineated sales and outlay data for a business competing in the market.
Verified Answer
CZ
chengjie zhengJul 28, 2024
Final Answer :
False
Explanation :
In a perfectly competitive market, when firms produce at the output level where marginal revenue equals marginal cost, they are maximizing their profits, but this does not guarantee an economic profit. They could be breaking even (earning normal profit) or even incurring losses if the market price is below, equal to, or just above average total cost, respectively.
Learning Objectives
- Expound on the decision-making protocol for entities operating within perfectly competitive markets in relation to production and operating decisions.
- Ascertain and detail the entire financial income and profitability employing delineated sales and outlay data for a business competing in the market.
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