A firm in a perfectly competitive market
A) is aware of its competitors' costs.
B) is dependant upon the behaviour of its competitors.
C) competes actively with other sellers in the industry.
D) has no power to influence the market price.
E) is limited in the amount of product it can sell without affecting the price.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, no single firm has the power to influence the market price. The price is determined solely by the forces of supply and demand. Therefore, choice D is the correct answer. Choices A, B, and E are incorrect because in a perfectly competitive market, firms have no information about their competitors' costs, are not dependent on their competitors' behavior, and can sell as much as they want at the prevailing market price. Choice C is also incorrect because firms in a perfectly competitive market do not actively compete with each other in a strategic sense, but instead are passive price-takers.

A Firm in a Perfectly Competitive Market