Suppose a perfectly competitive firm increases its output.In order to sell this additional output,the firm:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and sells its output at the prevailing market price. Therefore, in order to sell the additional output, the firm should price it at the market price. If the firm tries to raise its price to sell the additional output, consumers will switch to other firms offering the same product at a lower price. Similarly, if the firm tries to lower its price too much, it will not be able to cover its costs and may even incur losses. Therefore, the best option for the firm is to sell the additional output at the market price.

Suppose a Perfectly Competitive Firm Increases Its Output