When economists say that a perfectly competitive firm is a "quantity adjuster", they mean that
A) it can vary its output by an infinite amount.
B) changing the output level does not affect the costs of production.
C) its marginal- cost curve coincides with its own demand curve.
D) it is a price taker.
E) it is not concerned with cost factors.

Question

Quizplus · Accepted Answer

A perfectly competitive firm is a price taker, which means that it cannot influence the market price and must accept it as given. Therefore, if the firm wants to increase its revenue, it must increase the quantity of output it produces. Alternatively, if it wants to decrease its revenue, it must decrease the quantity of output it produces. This is why economists refer to a perfectly competitive firm as a "quantity adjuster." Choices A, B, C, and E are incorrect because they are not accurate descriptions of a perfectly competitive firm's behavior.

When Economists Say That a Perfectly Competitive Firm Is a "Quantity