Why does a firm in a competitive industry charge the market price?
A)If a firm charges less than the market price, it loses potential revenue.
B)If a firm charges more than the market price, it loses all its market power.
C)The firm can only sell limited number of units of output, so it wants to sell at the market price in order to lower its costs.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In a competitive market, firms are price takers and must charge the market price to maximize revenue. Charging less than the market price results in lost revenue, while charging more results in losing customers to competitors.

Why Does a Firm in a Competitive Industry Charge the Market