A firm is said to be earning just normal profit when______.

AC=AR

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MC=MR

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AC=MR

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MC=AC

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Solution

The correct option is A AC=AR
Normal profit is the minimum amount of return which a producer expects from the product sold. It is the amount that induce the producer to stay in the competition and supply products in the market. A firm is set to earning normal profits when total cost is equal to total revenue or average cost is equal to average revenue.

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