Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run because
A)Owners of perfectly competitive firms realise that their short-run profits are temporary.Therefore, they either sell their businesses or develop other products that will earn short-run profits.
B)Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realise that all of the firms sell virtually identical products.
C)Firms from other countries are able to produce similar products at lower costs.
D)Firms in these industries sell identical products.

Question

Quizplus · Accepted Answer

Firms in perfectly competitive industries sell identical products, which makes it impossible for them to differentiate their products from those of their competitors. As a result, consumers have no reason to pay a higher price for a particular firm's product, and firms are unable to control the price they charge in the market. This lack of market power means that firms in perfectly competitive industries cannot earn profits in the long run.

Firms in Perfectly Competitive Industries Are Unable to Control the Prices