Briefly explain the relationship between market price and a firm's profitability in a perfectly competitive market
If the market price faced by a perfectly competitive firm is above the average total cost at the profit-maximizing quantity of output, then the firm is making profits. If the market price is below the average total cost at the profit-maximizing quantity of output, then the firm is making losses. If the market price is equal to the average total cost at the profit-maximizing level of output, then the firm is making zero profits.
You might also like to view...
Based on the above production data table for Ken's Pizza Parlor, we know that the average product of labor curve begins to decrease after hiring worker ________
A) 1 B) 2 C) 3 D) 4
Which of the following is true?
A) Employment and unemployment are both coincident with the business cycle. B) Employment and unemployment are both procyclical. C) Employment is procyclical and unemployment is coincident with the business cycle. D) Employment is procyclical and unemployment is countercyclical.