Which of the following is a characteristic of a firm in a perfectly competitive market?
A)The firm cannot make a profit in the short run because it is too small a part of the total market.
B)The firm can make a profit in the long run but not in the short run.
C)The firm can sell as much as it wants without having to lower its price.
D)The firm must lower its price in order to increase quantity demanded.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many small firms selling identical products. The firm has no market power and cannot influence the market price. Therefore, the firm can sell as much as it wants without having to lower its price because it is a price taker. Option A is incorrect because in the short run, a perfectly competitive firm can make a profit if its price is above its average variable cost. Option B is incorrect because in the long run, the firm earns only normal profits. Option D is incorrect because the firm does not have to lower its price to increase quantity demanded as it can sell as much as it wants at the market price.

Which of the Following Is a Characteristic of a Firm