What is true if a firm is producing the profit-maximizing quantity and charging the profit-maximizing price?

When a firm is producing the profit-maximizing quantity and charging the profit-maximizing price, it indicates that the firm is operating at a point where its marginal cost equals its marginal revenue. This condition is essential for maximizing profits because it ensures that the firm is maximizing the difference between total revenue and total costs.

In this scenario, if the firm is indeed meeting these conditions, it is likely to be making economic profits, which are the profits exceeding the normal returns on investment. This means the firm not only covers all its explicit and implicit costs but also earns additional profit on top of that.

While breaking even occurs when a firm's total revenues equal its total costs, which is not indicative of a profit-maximizing scenario, the presence of losses would imply that the firm's revenues do not cover its total costs at the profit-maximizing quantity and price. Similarly, reducing output might suggest that the firm is not optimizing its production levels or prices, which contradicts the scenario of profit maximization. Therefore, the assertion that the firm is making economic profits aligns perfectly with the principles of profit maximization in economics.