Which of the following characterizes a supplier of a good in a perfectly competitive market?
A)It can influence the price of its product.
B)In the short run, it produces a positive amount only if price is greater than average total cost.
C)It chooses output such that marginal cost equals price.
D)In the long run, it will shut down if price exceeds average variable cost.
E)None of the above.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, suppliers are price takers and cannot influence the price of their product. In the short run, they will produce as long as price exceeds average variable cost. However, in the long run, they will exit the market if price is less than average total cost. The optimal output for a supplier in a perfectly competitive market is where marginal cost equals price.

Which of the Following Characterizes a Supplier of a Good