The behavior expected in a competitive market includes
A)Very little entry and exit.
B)Marginal cost pricing.
C)Aggressive behavior among competitors to control prices.
D)Little technological growth.

Question

Quizplus · Accepted Answer

In a competitive market, firms are expected to engage in marginal cost pricing in order to remain competitive with their rivals. This means that firms will only charge a price that covers the cost of the additional units they produce, rather than setting a higher price that includes a profit margin. This behavior helps keep prices low and prevents any one firm from gaining a significant advantage over the others. The other choices are not expected in a competitive market: there should be relatively easy entry and exit, so A is not correct; aggressive behavior to control prices would undermine the market's competitive nature, so C is not correct; and little technological growth would mean that firms are not innovating to find ways to produce goods and services more efficiently, so D is not correct.

The Behavior Expected in a Competitive Market Includes