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Sagot :
If a competitive firm’s marginal revenue is equal to marginal cost, the firm is earning positive economic profits when the price is above the average cost.
If the price exceeds average total cost, then the firm generates the economic profit, it means the profit which is above normal profit by production of the quantity that equates marginal revenue and marginal cost.
However, if the price falls below average total cost, then the firm faces an economic loss.
The average cost pricing rule is a standardized pricing rule which the regulators impose on certain businesses in order to limit what those companies are able to charge their consumers for its products or services to a price which is equal to the costs necessary to create the product or service.
To know more about average cost here:
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