alleryA perfectly competitive firm sells at price ₹ 20, which exactly equals its average total cost of ₹ 20 per unit. The firm is earning:
ANormal profit only
BSupernormal profit
CAn economic loss
DZero total revenue
Answer & Solution
Correct answer: A. Normal profit only
1. ATC already includes a normal return on the entrepreneur's own resources.
2. When AR equals ATC, the firm just covers all costs including this normal return.
3. Economic (supernormal) profit equals AR minus ATC, which here is zero.
4. Therefore the firm earns normal profit only.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.5_
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