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:

Tax

A mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Economic Wants

Desires for goods and services that can be satisfied through market transactions or consumption, including basic needs and luxuries.

Unlimited Resources

A hypothetical situation where resources available for use are infinite, eliminating constraints on usage or production.

Recurring Theme

A motif or subject that appears repeatedly throughout a work of literature, music, or art, emphasizing a particular idea or message.