ECONOMICS
INCENTIVES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
A
|
|
|
B
|
|
|
C
|
|
|
D
|
Detailed explanation-1: -In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC). This implies that a factor’s price equals the factor’s marginal revenue product.
Detailed explanation-2: -A competitive market is a structure in which no single consumer or producer has the power to influence the market. Its response to supply and demand fluctuates with the supply curve, a representation of a product’s quantity.
Detailed explanation-3: -A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. Due to market competition, most producers are also price-takers. Only under conditions of monopoly or monopsony do we find price-making.
Detailed explanation-4: -Key points. A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it sells goods. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales.