Why Can't a Firm in a Perfectly Competitive Industry Charge

question 14

Multiple Choice

Why can't a firm in a perfectly competitive industry charge a price above the market-clearing price?

• A) Government-imposed price ceilings prevent prices from being raised.
• B) Firms in a perfectly competitive industry face significant barriers to entry.
• C) Perfectly competitive firms are price searchers.
• D) Numerous competitors produce the same product and charge the market price.

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Definitions:

Estimable

Capable of being estimated or approximated in magnitude or extent.

Remote

Refers to working from a location outside of the traditional office environment, often implying work done from home or another location through the internet.

Contingent Liability

A possible financial duty that could emerge in the future, contingent on the result of a certain event.

Probable

A term used in accounting and finance to describe events or outcomes that are likely to happen or transactions that are likely to occur.