The firm in a perfectly competitive market will:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker, meaning it has no control over the market price. Therefore, the best option for the firm is to try to keep its average total cost (ATC) below the market price to earn a profit. If the ATC exceeds the market price, the firm will incur losses and eventually exit the market. Thus, option D is the correct choice. The other options are incorrect because a firm in a perfectly competitive market cannot set the price or use non-price competition techniques like advertising. Additionally, loss minimisation and profit maximisation are both achieved by producing where marginal cost equals market price, so there are no different rules for these objectives.

The Firm in a Perfectly Competitive Market Will