AP microeconomics question (can someone explain the answer please? thanks!)

Question

To maximize profit, a firm should produce the quantity at which marginal revenue equals marginal cost unless, in the long run, the firm would

a) earn positive accounting profit.

b) earn positive economic profit.

c) earn zero economic profit.

d) earn less than normal profit.

e) receive a price equal to its marginal revenue.

answer is d, and I want an explanation why it's the correct answer.

Answer 1

Normal profit is a term used to mean ATC = P, and the firm will break even. If MC = MR occurs at a quantity where P<ATC, the firm should exit the market to use AP Micro terminology.

In otherwords, profit maximization always occurs at a quantity where MR = MC, but if the price that corresponds to that point is less than the average costs of producing the output, the firm is losing money and in the long run, it should exit that market. For a monopoly, P > MC = MR, and for a perfect competitor, P=MR=MC. This firm should stay in the market if it's earning positive accounting or economic profits and we assume that firms under perfect and monopolistic competition will stay in the market in the long run when P=ATC and they are earning no economic profit.

This is all different than in the short run, where the firm should produce as long as P>AVC.