Question

If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?

		increase production in order to make an economic profit
		remain open but decrease production in order to make an economic profit
		go to work in the next-best earning opportunity
		shut down, with a loss equal to total fixed cost
		continue at the current output, making zero economic profit

Answer 1

continue at the current output, making zero economic profit

Explanation :

Currently if firm making zero economic profit and producing at profit maximising quantity. It should continue to operate.

Because in long run, all firms in perfectly competitive market earns zero economic profit. But they earns positive accounting profit.

Because economic cost is greater than accounting cost, economic profit is always less than accounting profit. Economic cost includes explicit and implicit cost where as accounting cost includes only explicit cost.