In a perfectly competitive market with 100 identical firms producing at market price p₁

Question

Quizplus · Accepted Answer

In a perfectly competitive market, all firms are price takers, meaning they have no control over the market price and must accept it as given. Therefore, each firm produces at the point where its marginal cost equals the market price, which is the same for all firms. This implies that all the firms have identical marginal costs (Option C). 
Since each firm is small relative to the market, its production decisions do not affect the market price, and the market supply curve is the horizontal sum of individual firms' supply curves. The larger the number of identical firms, the larger is the quantity supplied at any given price, and the flatter is the market supply curve. This makes the market supply curve more elastic (Option B), and therefore, the best answer choice is D.

In a Perfectly Competitive Market with 100 Identical Firms Producing