Explain why a perfectly competitive firm has no incentive to charge a higher or lower price than the market price.
What will be an ideal response?
If a firm charged a price higher than the market price, the firm would not sell any of its products because there are many other firms selling the identical product at the lower market price. The firm would not have an incentive to charge a price lower than the market price because it can sell all the output it produces at the higher market price.
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If the amount paid as unemployment benefits decreases, the opportunity cost of job search
A) falls and people stay unemployed for a shorter time. B) rises and people would stay unemployed longer. C) rises and people stay unemployed for a shorter time. D) falls and people stay unemployed for a longer time. E) is not affected because unemployment benefits do not change job availability.
When workers voluntarily leave work while they look for better jobs, the resulting unemployment is called
A) structural unemployment. B) frictional unemployment. C) cyclical unemployment. D) underemployment.
If the total cost of producing 2 pounds of cheese is $6 and the total cost of producing 4 pounds of cheese is $8, then:
a. marginal cost of producing cheese declines as output increases. b. average total cost of producing cheese declines as output increases. c. average total cost of producing cheese increases as output increases. d. average total cost remains constant irrespective of the change in output. e. marginal cost remains constant irrespective of the change in output.
Monetarists believe that an increase in the money supply will lead to
a. a decrease in investment b. an increase in the interest rate c. a decrease in the price level d. an increase in nominal GDP e. an increase in real GDP