Suppose a firm in a competitive market increase its output by 25 per cent, the price of its output is likely to:

Question

Quizplus · Accepted Answer

In a competitive market, the firm is only a price taker and has no control over the market price. Therefore, if the firm increases output by 25%, the market price will remain unchanged since there are many other firms offering the same product at the same price. This means that the firm's total revenue will increase by 25%, but its price per unit will remain the same.

Suppose a Firm in a Competitive Market Increase Its Output