A perfectly competitive firm can?

Question

A. sell at a higher price to customers willing to pay more.

B. sell all of its output at the prevailing market price.

C. sell additional output only by lowering its price.

D. raise its price in order to increase its total revenue

E. usually not sell all the output it produces, but still "over produces" because there are some periods when it can sell the extra output at very profitable price.

An explanation would be appreciated. Thanks!!

Answer 1

B.  

This is the definition of a perfectly competitive firm.

If you want why the others are wrong:

A- If they charge a higher price, they will sell nothing, by the def. of a PC firm.  

C- By def. of a PC firm, they will sell all their output at the market price, so lowering their price will just reduce their profits.

D- See A.

E- The price in the next period will be the same as the price in this period because if the price were to go up, then more people would start producing this good until the price was back at the old one. Therefore, there is no incentive to overproduce in any given period.  

Answer 2

B.  

Answer 3

d. raise its price in order to increase its total revenue

Answer 4

B. sell all of its output at the prevailing market price.

It actually is given by by definition of perfectly competitive market - so firm will sell all output at market price, it will not affect market price and will not affect industry supply.