Explain Why a Perfectly Competitive Firm Has No Incentive to Charge

question 35

Essay

Explain why a perfectly competitive firm has no incentive to charge a higher or lower price than the market price.

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Definitions:

Cost Basis

The original value of an asset for tax purposes, adjusted for factors like depreciation, improvements, and returns, used to calculate capital gains or losses.

Transportation Costs

Expenses associated with the movement of goods from one location to another, including freight, shipping, and handling fees.

Special Acquisition Fees

Costs specifically related to acquiring an asset or a group of assets, other than the purchase price.

Units-of-Activity Method

A depreciation method that allocates expense based on the number of units produced or the use of the asset over time.