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Chapter 9: Problem 20

Under perfect competition, (LO4) a) many firms have some influence over price b) a few firms have influence over price c) no firm has any influence over price

Short Answer

Expert verified
In a perfectly competitive market, no individual firm has any influence over price because there are a large number of small firms producing identical products and each firm takes the market price as given. Therefore, the correct answer is c) no firm has any influence over price.

Step by step solution

01

Recall the characteristics of perfect competition

In a perfectly competitive market, there are a large number of small firms, no entry barriers, and the firms produce homogeneous and identical products. The key characteristic of perfect competition is that each firm is a price taker. It means that they have no influence over the market price since there are too many firms present, and their individual actions do not impact the market.
02

Analyze the given options

Now, let's examine each of the provided options: a) many firms have some influence over price: This statement contradicts the price-taker characteristic of perfect competition. In perfect competition, firms have no influence over the market price due to their insignificant existence in the market. b) a few firms have influence over price: This option also does not fit the characteristics of perfect competition. In a situation where a few firms can control the price, the market structure would be an oligopoly, not perfect competition. c) no firm has any influence over price: This option aligns with the characteristics of perfect competition. In this market structure, no individual firm has power over the price due to the large number of firms, with each having a negligible market share.
03

Choose the correct option

Based on the analysis of each option and their alignment with the characteristics of perfect competition, the correct answer is: c) no firm has any influence over price

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Most popular questions from this chapter

Statement 1: The firm's short-run supply curve runs up the marginal cost curve from the shut-down point to the break-even point. Statement 2: The firm will not accept a price below the break-even point in the short run. (LO6) a) Statement 1 is true, and statement 2 is false. b) Statement 2 is true, and statement 1 is false. c) Both statements are true. d) Both statements are false.

A firm with explicit costs of \(\$ 2\) million, no implicit costs, and total revenue of \(\$ 3\) million would have (LO2) a) zero economic profit b) zero accounting profit c) an accounting profit and an economic profit of \$1million d) a higher economic profit than an accounting profit e) a higher accounting profit than economic profit

Perfect competition is (LO4) a) the prevalent form of competition in the United States b) the only form of competition in the United States c) found occasionally d) probably impossible to find

The most efficient output of a firm is located (LO1, 7) a) at the shut-down point b) at the break-even point c) where \(\mathrm{MC}=\mathrm{MR}\) d) when the vertical distance between AVC and ATC is at a maximum

If a perfectly competitive firm sells 10 units of output at a price of \(\$ 10\) per unit, its marginal revenue per unit is (LO1) a) \(\$ 1\) b) \(\$ 10\) c) \(\$ 100\) d) more than \(\$ 1\), but less than \(\$ 10\) e) more than \(\$ 10\), but less than \(\$ 100\)
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