A perfectly competitive firm faces a price of $10 per unit and produces at level

Question

A perfectly competitive firm faces a price of $10 per unit and produces at level where marginal cost is $10 on the rising portion of its marginal cost curve. Its long run marginal cost is $12 per unit and short run average variable cost is $10 per unit. Is this firm earning an economic profit, and should it alter its output in the short/long run?

I'm actually quite lost on this question. I'm not sure exactly how to approach this question, and the textbook is providing me with no help. I thank you all in advance for your help.

Explanation / Answer

A firm only earns economic profit if price>average variable cost

p=10=AVC: =0

Average cost is minimized when Average cost=marginal cost. The firm has this in the short run, but not in the longrun.

The firm needs to increase Price and keep AC=MC to make economic profit.

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