When price falls in a perfectly competitive industry, each firm will
A) sell more output
B) sell the same amount of output but earn less economic profit
C) sell less output
D) raise its price
E) shut down production until price regains its former level

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot influence the market price. When the price falls, firms will sell less output because the lower price may not cover the marginal cost of producing additional units, leading to reduced production.

When Price Falls in a Perfectly Competitive Industry, Each Firm