If a firm in a perfectly competitive industry lowers its price below the market price, its
A) total revenue will increase.
B) profit will decrease.
C) sales will drop to zero.
D) demand curve will become downward sloping.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers, meaning they have no control over the market price. If a firm lowers its price below the market price, it will sell its product at a loss compared to the market price, thereby decreasing its profit. Other choices do not accurately reflect the outcomes in a perfectly competitive market.

If a Firm in a Perfectly Competitive Industry Lowers Its