Why do firms in perfectly competitive markets have no control over the price of their products?
What will be an ideal response?
Firms in competitive markets are price takers, because all firms in the market
produce identical products and each firm is small relative to the size of the market. Raising prices above this price would result in losing all its sales because consumers perceive the products to be identical. Setting a price below this level would not increase the number of consumers but only result in a decline in revenue.
You might also like to view...
If the Kyoto Protocol requires developed countries to reduce emissions of greenhouse gases, but developing countries are not required to do so, why might a developed country still agree? Should it?
What will be an ideal response?
Which of the following is true?
a. Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers. b. Only direct monetary costs matter in making decisions. c. If a good is provided free to an individual, its production will not consume valuable scarce resources. d. Secondary effects are seldom of importance in economics.