If firms are earning zero economic profits, they must be producing at an output level at which: ...
Question:
If firms are earning zero economic profits, they must be producing at an output level at which:
a. price minus marginal cost.
b. Total revenue equals total costs, in other words, normal profits.
c. price equals average variable cost.
d. marginal revenue equals marginal cost.
e. none of the above
Competitive Prices:
The competitive prices are prevalent in the perfectly competitive market setup. These prices are fixed for individual market participants. These fixed prices are determined by the fluctuations and interactions of the aggregate demand and supply of all market participants.
Answer and Explanation: 1
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View this answerThe correct options are:
b. Total revenue equals total costs, in other words, normal profits.
d. marginal revenue equals marginal cost.
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Perfect Competition in Economics & Adam Smith's 'Invisible Hand'
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Chapter 7 / Lesson 1
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Perfect competition is perpetuated in regulated economic market systems, as the concept of the 'invisible hand,' devised by Adam Smith, keeps supply and demand lines in check. Learn more about these concepts, the five requirements for a perfectly competitive market, and market equilibrium, seeing applications of each through examples.
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