A perfectly competitive firm cannot affect the market price by raising or reducing its supply.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many firms selling an identical product, so no individual firm can affect the market price by changing its own supply. The price is determined by the intersection of the market demand and supply curves. Therefore, a perfectly competitive firm can only choose how much to produce based on its own costs and the market price, but it cannot influence the market price itself.

A Perfectly Competitive Firm Cannot Affect the Market Price by Raising