To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following except
A) the market price of output.
B) the technologies of production that are available to the firm.
C) the prices of inputs.
D) the prices charged by its rivals.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers, meaning they accept the market price determined by supply and demand. Therefore, the prices charged by rivals are irrelevant to an individual firm's production decisions, as all firms in a perfectly competitive market charge the same market price for their output.

To Determine the Optimal Method of Production for a Good