Question

In a perfectly competitive market, all of the following are true EXCEPT: firms take prices as...

In a perfectly competitive market, all of the following are true EXCEPT:

firms take prices as given.

firms produce the quantity for which marginal cost equals price.

firms can increase profits by charging a price higher than the market price.

buyers take prices as given.

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Answer #1

In a perfectly competitive market, all of the following are true EXCEPT:

Answer: Firms can increase profits by charging a price higher than the market price.

Explanation:

In a perfectly competetive market there are numerous buyers and sellers who captures only small fraction of the market. All the sellers produce same products so none of them can influence the price so sellers and buyers take prices as given . So firms take prices as given. In case of competetive market prices are equal to marginal revenue and firms produces at the point where marginal revenue equal to marginal cost or we can say firms produce the quantity for which marginal cost equal to price.

firms take prices as given.

firms produce the quantity for which marginal cost equals price.

.

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