A firm will make a profit when OA P AVC O B P ATC C P MC O

A firm will make a profit when OA. P> AVC O B. P ATC. ° C. P = MC. O D. P> ATC.

Solution

The right answer is option D. P > ATC

Explanation: A firm earns a profit when its total revenue is greater than its total cost. Total cost = quantity * ATC and total revenue = quantity * price. Total revenue is greater than total cost when price is greater than average total cost (ATC).