In case of short-run equilibrium, a perfectly competitive firm while earning abnormal profits operates at an output level where:

The correct answer is: A. Marginal cost is the minimum.

In a perfectly competitive market, firms are price-takers, meaning they cannot influence the market price of their product. As a result, firms will maximize profits by producing at the output level where marginal revenue equals marginal cost. In the short run, this will be at an output level where marginal cost is below average cost, as the firm will be able to cover its variable costs and some of its fixed costs. However, in the long run, firms will enter the market until profits are driven to zero, at which point marginal cost will equal average cost.

Here is a more detailed explanation of each option:

• Option A: Marginal cost is the minimum. This is the correct answer, as it is the only option that is consistent with the firm maximizing profits in the short run.
• Option B: Average cost is the minimum. This is not the correct answer, as the firm will not be maximizing profits if it is producing at an output level where average cost is the minimum. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output level where marginal cost is below average cost.
• Option C: Both marginal cost and average cost are equal. This is not the correct answer, as the firm will not be maximizing profits if it is producing at an output level where marginal cost and average cost are equal. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output level where marginal cost is below average cost.
• Option D: Marginal cost is higher than average cost. This is not the correct answer, as the firm will not be maximizing profits if it is producing at an output level where marginal cost is higher than average cost. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output level where marginal cost is below average cost.