A firm in a perfectly competitive market _____

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and has no control over the market price. It has to accept the market price for its product, and any attempt to raise the price will result in a decrease in demand as consumers can easily switch to a competitor offering the same product at a lower price. Similarly, decreasing the supply will lead to a shortage of the product in the market, and the firm may lose customers to competitors who are offering the same product at a regular price. Therefore, the only feasible option for the firm is to accept the market price and produce at the level where marginal cost equals marginal revenue.

A Firm in a Perfectly Competitive Market _____