Final answer:
Economic profit in pure competition is calculated by taking the price, subtracting average total cost, and multiplying by quantity sold.
Step-by-step explanation:
The accurate method for calculating economic profit in pure competition is indeed 'Price minus average total cost multiplied by quantity.' This calculation involves taking the market price of the product, determined by the market's supply and demand dynamics, and subtracting the average total cost of production. The result is then multiplied by the quantity of the product sold.
Economic profit, in the context of pure competition, serves as a crucial indicator of a firm's efficiency and success within the competitive market. A positive economic profit suggests that a firm is earning more than the average total cost per unit, signaling profitability and competitiveness. Conversely, a negative economic profit implies that the firm is not covering its costs, raising questions about its sustainability in the long term. Understanding economic profit is fundamental for firms operating in pure competition as it provides insights into their performance and market position.