CFA Practice Question

CFA Practice Question

In equilibrium, a price taker firm will ______.
A. earn positive accounting profits but zero economic profits
B. earn positive accounting and economic profits
C. set its marginal cost to average variable cost
Explanation: Accounting profits take into account only explicit costs, while economic profits take into account both explicit and implicit costs. In equilibrium, price taker firms will make zero economic profits but positive accounting profits.

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