If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:

Question

Quizplus · Accepted Answer

If a price-taking firm sells above the market-clearing price, it will not be able to sell any of its output because consumers will switch to other firms selling at the market-clearing price. This is because for price-taking firms, the demand is perfectly elastic, which means that consumers are willing to buy the product at the market-clearing price but not at higher prices. Thus, the firm will lose all its customers and profits.

If a Price-Taking Firm Selling in a Competitive Market Raises