If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?
A)The firm's revenue will not change because some consumers will refuse to pay the higher price.
B)The firm will not sell any output.
C)The firm's total revenue will increase only if the demand for its product is inelastic.
D)The firm's total revenue will increase only if the demand for its product is elastic.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms are price takers and cannot set prices above the market equilibrium. If a firm raises its price, consumers will buy from other firms, resulting in the firm selling no output.

If a Perfectly Competitive Firm Raises the Price It Charges