Why Does a Firm in a Competitive Industry Charge the Market

question 213

Multiple Choice

Why does a firm in a competitive industry charge the market price?

• A)If a firm charges less than the market price, it loses potential revenue.
• B)If a firm charges more than the market price, it loses all its market power.
• C)The firm can only sell limited number of units of output, so it wants to sell at the market price in order to lower its costs.
• D)All of the above are correct.

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Definitions:

Management Fee Revenue

Income earned by an entity for providing managerial services or advice to other companies.

Supplying Service

The act of providing a service to customers, clients, or inside an organization as opposed to delivering a tangible product.

Cost

The amount of money or resources expended to acquire an asset, service, or achieve a specific objective.

Cash

Money in the form of currency, which includes bills and coins, that can be used to purchase goods and services.