In a perfectly competitive market,if the product price remains unchanged,a fall in the price of an input used by a firm will:
A)cause the firm to substitute away from this input.
B)reduce the quantity of output it produces.
C)shift the marginal cost curve downward.
D)reduce the price of the product.

Question

Quizplus · Accepted Answer

A fall in the price of an input used by a firm will lead to a decrease in the firm's marginal cost, which would shift the marginal cost curve downward. Since the product price remains constant in a perfectly competitive market, the firm will continue to produce the same quantity of output. As a result of the lower marginal cost, the firm could increase its profits or potentially lower the price of the product.

In a Perfectly Competitive Market,if the Product Price Remains Unchanged,a