Perfectly competitive firms cannot individually affect market price because

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many firms producing identical goods, and none of them has a significant share of the total output. Therefore, no individual firm can influence the market price, which is determined by the interaction of market supply and demand. If a firm tries to raise its price above the market price, it will lose all its customers to other firms, and if it tries to lower its price below the market price, it will not gain any additional customers, as there is an infinite supply of identical goods. Thus, perfectly competitive firms are price takers, not price makers. Choice A and B are incorrect because they do not accurately describe the conditions of a perfectly competitive market. In a perfectly competitive market, there is a finite demand for each individual firm's goods, and demand is perfectly elastic, not inelastic.

Perfectly Competitive Firms Cannot Individually Affect Market Price Because