Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits,the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign,ceteris paribus,would be
A)Economic losses for the firm.
B)The ability to sell more at the existing market price.
C)The ability to sell more at a lower price.
D)The ability to sell more at a higher price.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot influence the market price through advertising. The cost of the advertising campaign would increase the firm's expenses without increasing the price it can charge for its product, leading to economic losses.

Suppose a Perfectly Competitive Firm Is Experiencing Zero Economic Profits