Question

If a perfectly competitive firm finds that the price exceeds its ATC​, then the firm A. will lower its price to increase its economic profit. B. is earning zero economic profit. C. will raise its price to increase its economic profit. D. is earning an economic profit. E. is incurring an economic loss.

Answer 1

D. is earning an economic profit

Step-by-step explanation:

When the price exceeds its average total cost (ATC) so the perfectivity competitive firm would be earned the positive economic profit in the short run

As we know that

Profit = Total revenue - Total cost

= PQ - ATC ×Q

= Q × (P - ATC)

Now if the price is more than the ATC so it would lead to positive profits

Hence, d option is correct