Final answer:
Jason, as a profit-maximizing pool cleaner in a perfectly competitive market, will produce where marginal cost equals marginal revenue, also known as the market price. If the market price exceeds average total cost, Jason will earn profits; if it is less, he will incur losses. Over time, market adjustments lead to a zero-profit equilibrium as firms enter or exit the market.
Step-by-step explanation:
In a perfectly competitive market, a profit maximizer like Jason, who cleans swimming pools, will produce at the quantity of output where marginal cost (MC) equals marginal revenue (MR), which is also the market price (P). This is because a perfectly competitive firm's marginal revenue is equal to the price of the good in the market. Profit maximization occurs at the point where the additional cost of producing one more unit (MC) equals the additional revenue gained from selling that unit (MR). When MC equals MR, it implies that earning power from the last unit produced and sold has been optimized.
If the market price is higher than the average total cost (ATC), then the firm makes an economic profit. However, if the market price is less than ATC, the firm incurs losses. In the case where the market price equals ATC at the profit-maximizing output level, the firm breaks even, earning zero economic profit.
In the long run, firms will respond to profits by entering the market or expanding, and to losses by exiting, leading to a price level in a perfectly competitive market that will gravitate towards the point where MC intersects ATC, known as the zero profit point.