All firms in a perfect competition industry

Question

Quizplus · Accepted Answer

In a perfect competition industry, all firms produce identical or homogeneous products, meaning that they cannot differentiate their products from their competitors. Therefore, they are price takers and cannot set the price. They have to accept the market price, and if they try to charge a higher price, they will lose customers to their competitors. They can only control the quantity of output they produce, but not the price.  They earn normal profit, which means they make enough revenue to cover their production costs, but they do not make any economic profit.

All Firms in a Perfect Competition Industry