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In a perfectly competitive market a) A firm must lower price to attract more customers
In a perfectly competitive market
a) A firm must lower price to attract more customers.
b) The additional revenue from selling one more unit of output is less than price.
c) Demand facing the industry is perfectly elastic.
d) All of the above
e) None of the above
Expert Solution
In a perfectly competitive market
An answer to this question is:
e. None of the above
a) A firm must lower price to attract more customers.
Firms under perfectly competitive market are price takers. The prices are set by the price mechanism, that is, the forces of supply and demand.
b) The additional revenue from selling one more unit of output is less than price.
The additional revenue from selling one more unit of output is equal to the price, that is, marginal revenue (MR) = Price (P).
c) Demand facing the industry is perfectly elastic.
The demand facing the industry is downward sloping. On the contrary, the demand facing an individual firm is horizontal, that is, perfectly elastic.
d) All of the above
All of the above (a, b, and c) are untrue about the perfectly competitive market.
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