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Firms in a perfectly competitive market are said to be "price takers" that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

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Anne Gillian Duero
Anne Gillian DueroLv10
24 Oct 2020

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Related questions

Identify a market which you feel is perfectly competitive. The firms in this structure are considered price takers, are the firms in the market you chose all selling their product at the same price? Why or why not?

1. If the ATC curve is above the demand curve in a perfectly competitive firm, the firm will have a:
- profit
- loss
- break-even
- price floor
 
2. If the ATC curve is below the demand curve in a perfectly competitive firm, the firm will have a:
- profit
- loss
- break-even
- price ceiling
 
3. Even if in the short run, a perfectly competitive firm has a profit; in the long run, they always break even because:
- low barriers to entry
- profit incentives attract new firms
- perfectly homogenous products
- all of the above
 
4. A perfect competitor would:
- never charge above market price but might charge below market price
- never charge below market price but might charge above market price
- always change the market price
- none of the above
 
5. The crucial aspect of competition among firms that leads to the condition of zero profits in the long run is
- the number of firms in the industry is fixed
- free entry and exit of firms in the industry
- fixed costs equal zero
- all costs are at their least cost level.
 

1. A firm that is a pure competitor has P > ATC and P > MC on the output (Q) it is presently producing and selling. Is this firm maximizing its profits? If not, which direction should it change its output if it wants to maximize its total profit?

2. Is a pure competitor in short-run or long-run equilibrium if it has P=MC=ATC? Explain.

3. There is free entry in the model of pure competition. Assuming that P > ATC for a vast number of firms producing a standardized product for a given market, what will happen to market supply as the consequence? What will happen to the market price (P) of the product these firms are producing?

4. Firms in the pure competition have horizontal demand functions. (The market determines product price, so firms in this competitive market are price takers.) Do firms in this model have to lower prices if they want to sell more output? Why or why not?

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