In order to decide the appropriate output to produce, the manager of a perfectly competitive firm needs to know
A) the prevailing market price for the firm's output.
B) what other firms in the industry are producing.
C) the industry or market demand.
D) the industry or market supply.
E) its competitors' market strategies.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and must accept the prevailing market price for its output. Therefore, the manager needs to know the prevailing market price in order to determine the appropriate output level to maximize profits. Knowing what other firms in the industry are producing, the industry or market demand, the industry or market supply, and its competitors' market strategies may provide helpful information, but ultimately the firm's decision will be based on the prevailing market price.

In Order to Decide the Appropriate Output to Produce, the Manager