Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe?

Question

Quizplus · Accepted Answer

Perfect competition implies that firms are price takers, meaning they have no market power to influence prices. Therefore, option D is the correct answer. Option A is incorrect because the law of diminishing marginal returns holds true regardless of market structure. Option B is incorrect because firms in perfect competition strive to operate where price equals marginal cost, not average variable cost. Option C is incorrect because firms in perfect competition strive to operate where price equals marginal cost, not total cost.

Suppose Life Is Discovered on Mars and That It Turns