Why Will a Perfectly Competitive Firm Not Sell Its Product

question 108

Multiple Choice

Why will a perfectly competitive firm not sell its product below the prevailing market price?

• A)It faces inelastic demand.
• B)It can sell all it wishes at the market price.
• C)The sellers in the market have agreed to not sell below a specified price.
• D)Its costs would increase dramatically.
• E)This would lead to a price war among sellers.

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Definitions:

Lowball Technique

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Reciprocity Norm

A social norm that suggests individuals should help those who have helped them, creating a cycle of mutual assistance.

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