If the equilibrium price in a perfectly competitive market for walnuts is $4.99 per pound,then an individual firm in this market can
A)Not sell additional walnuts unless the firm lowers its price.
B)Not sell additional walnuts at any price because the market is at equilibrium.
C)Sell an additional pound of walnuts at $4.99.
D)Sell more only by increasing its advertising budget.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, each firm is a price taker and cannot influence the market price. Therefore, an individual firm can sell as much as it wants at the prevailing market price of $4.99 per pound. The firm cannot charge a higher price as there are many other firms offering similar products at the same price. Additionally, the firm cannot lower its price as this would result in lower profits, and it cannot charge a higher price as it would lose sales to other firms. Therefore, the best choice is C, which states that the firm can sell an additional pound of walnuts at $4.99.

If the Equilibrium Price in a Perfectly Competitive Market for Walnuts