In a perfectly competitive market:
A) firms are price setters.
B) firms produce the quantity for which marginal cost equals price.
C) firms can increase profits by charging a price higher than the market price.
D) buyers are price setters.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot set the market price. Therefore, they produce the quantity for which marginal cost equals price in order to maximize profits. Firms cannot charge a higher price than the market price as there are many other firms offering the same product. Buyers are also price takers and cannot set the market price.

In a Perfectly Competitive Market