Perfectly competitive firms cannot individually affect market price because
A)There is an infinite demand for their goods.
B)Demand is perfectly inelastic for their goods.
C)There are many firms,none of which has a significant share of total output.
D)The government exercises control over the market power of competitive firms.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many firms producing similar goods, none of which has a significant market share. As a result, no individual firm has the power to affect market prices. If one firm tries to increase prices, consumers will switch to competing firms, resulting in a loss of market share and profits for the firm that raised prices. Similarly, if one firm tries to lower prices, it will not gain a significant market share because all firms are producing the same goods. This is why perfectly competitive firms cannot individually affect market prices.

Perfectly Competitive Firms Cannot Individually Affect Market Price Because