To determine: The characteristic of the perfect competitive firm.
Answer to Problem 1CQQ
Answer:
Option ‘c’ is correct.
Explanation of Solution
Option (c):
The competitive firm deals with the large number of buyers and sellers who trade homogeneous commodities, and the price is fixed by the market supply and demand forces. Thus, the firm is considered as a price taker. Thus, option ‘c’ is correct.
Option (a):
A profit-maximizing price is set at the point where the marginal revenue of the firm is equal to marginal cost. But in the competitive market, price is set by the equilibrium between the market demand and supply. Thus, option ‘a’ is incorrect.
Option (b):
Undercut price is done in an oligopoly. Thus, option ‘b’ is incorrect.
Option (d):
The largest market share is the driven motive for the managers whose remuneration is based on the sales revenue. Thus, option ‘d’ is incorrect.
Concept introduction:
Perfect competitive firm:
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Chapter 14 Solutions
Principles of Microeconomics
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