Final answer:
Sarah's pottery studio is breaking even because her market price is just higher than her minimum average total cost, meaning she earns zero economic profit in this case. The correct answer is option b.
Step-by-step explanation:
If Sarah's pottery studio is charging a market price that is just higher than her minimum average total cost, it means she is breaking even. To understand this, consider a situation where total revenues equal total costs; in such a scenario, the firm is making zero economic profit, which is the same as breaking even.
This outcome is different from a situation where a firm makes losses, which occurs when the price is less than the average cost, leading to the firm incurring losses for each unit produced. Furthermore, this scenario is distinct from a monopolist earning consistent economic profits by setting prices above the average cost curve due to the existence of barriers to entry that prevent competitors from entering the market and driving down those profits.