When economists say that a perfectly competitive firm is a "quantity adjuster," they mean that
A)it adjusts its output in response to changes in prices.
B)it can vary its output by an infinite amount.
C)it is not concerned with cost factors.
D)its marginal-cost curve coincides with its own demand curve.
E)changing the output level does not affect the costs of production.

Question

Quizplus · Accepted Answer

A perfectly competitive firm is a quantity adjuster because it cannot influence the market price of the goods it produces. Therefore, in order to maximize its profits, it must adjust its output (quantity) in response to changes in the market price. If the price goes up, the firm will increase output, and if the price goes down, the firm will decrease output.

When Economists Say That a Perfectly Competitive Firm Is a "Quantity