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Chapter 21: Problem 20

Under perfect competition, (LO4) a) many firms have some influence over price b) a few firms have influence over price c) no firm has any influence over price

Short Answer

Expert verified
Under perfect competition, no firm has any influence over the price of the product, as described in statement c. Due to the large number of small firms producing identical products and high competition, individual firms cannot control or have a noticeable influence over price.

Step by step solution

01

Evaluate statement a

In a perfectly competitive market, many small firms produce identical products. As a result, no individual firm has the power to control or have significant influence over the price. Thus, statement a is incorrect.
02

Evaluate statement b

As mentioned earlier, perfect competition doesn't allow individual firms to have noticeable influence over the price, even if there are only a few firms involved. Statement b is incorrect as well, as it doesn't align with the concept of perfect competition.
03

Evaluate statement c

Under perfect competition, due to the large number of small firms producing identical products and high competition, no firm has any influence over the price of the product. This statement aligns with the characteristics of a perfectly competitive market structure. Therefore, statement c is correct. In conclusion, under perfect competition, no firm has any influence over price, as described in statement c.

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Most popular questions from this chapter

Which one of these markets would definitely not be perfectly competitive? (LO4) a) Foreign currency b) Wheat c) HDTVs d) The New York Stock Exchange

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