Refer to Figure 143 The firm will earn zero economic profit

Refer to Figure 14-3. The firm will earn zero economic profit if the market price is

$7.

$6.

$0.

$10.

	a.	$7.
	b.	$6.
	c.	$0.
	d.	$10.

Frice 19 18 17 16 15 14 13 12 MC 10 1 2 3 4 5 6 7 8 Quaxtity

Solution

If the market price is $6, the firm will earn zero economic profit. Reason for this is, the average total cost or ATC curve is at its lowest point at price $6 any price below this will give a loss and any price above $6 will give a profit but at $6 there will be no loss and no profit.

if the price is $10 the firm is making a huge profit, the same thing with the price $7, whereas if the price is zero the firm is making a loss.