In order to decide the appropriate output to produce,the manager of a perfectly competitive firm needs to know
A)the industry or market demand.
B)the industry or market supply.
C)what other firms in the industry are producing.
D)the prevailing market price for the firm's output.
E)its competitors' market strategies.

Question

Quizplus · Accepted Answer

The prevailing market price for the firm's output is the primary determinant of the appropriate output level for a perfectly competitive firm. In a perfectly competitive market, individual firms are price takers, meaning they have no control over the price at which they can sell their product. Therefore, they must produce at the output level where marginal cost equals the market price in order to maximize profits. Knowing the prevailing market price for the firm's output is crucial for making the appropriate production decision. Option A and B are important factors in determining the overall market conditions, but not necessarily for making the production decision of an individual firm. Option C and E are not relevant for a perfectly competitive firm, as the firm does not have any market power to affect its competitors.

In Order to Decide the Appropriate Output to Produce,the Manager