Question

Firms producing an identical product in a perfectly competitive market are producing at a quantity that maximizes profit. The current market price is $4.50 per unit, and the firms are producing at a long-run average cost of $3.50 per unit. Firms in this market experience

Answer 1

The correct answer is Profit.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Current market price = $4.50

Long run average cost = $3.50

As we know the following terms of the market, i.e

• If market price is greater than the cost, than it will give profit
• if market price is lower than the cost, than it will give loss.

Hence, from the above statement, as the firm is showing the greater market price and lower cost it will result is Profit to the firm.