To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following EXCEPT
A) the market price of output.
B) the technologies of production that are available to the firm.
C) the prices of inputs.
D) the prices charged by its rivals.

Question

Quizplus · Accepted Answer

The prices charged by its rivals are not necessary for a perfectly competitive firm to determine the optimal method of production. In a perfectly competitive market, all firms are price-takers and do not have the ability to influence market prices. This means that a perfectly competitive firm can simply assume that the market price is given and focus on minimizing their costs by choosing the most efficient method of production given the available technologies and input prices.

To Determine the Optimal Method of Production for a Good