Question

What prevents a perfectly competitive firm from seeking higher profits by increasing the price that it charges?

Short answer

Perfect competitive firm can't charge higher price to seek higher profits due to : Constant price, perfectly elastic demand, and normal profits in long run.

Step-by-step solution

Perfect Competition Definition 

It is a market where large number of buyers and sellers exchange homogenous goods at uniform prices, due to prevailing perfect information.

Entry and exit is easy in this market.

Price Concept 

Individual firms take up industry determined price.

Their demand curve is perfectly elastic & horizontal : demand responds infinitely to price change and infinite quantity can be sold at constant price only.

So, price can't be hiked for higher profit. As this would lead to loss of all customers.

Profit Concept 

Free entry and exit leads to firms earning only normal profits in long run.

Super normal profits imply more firms enter market. So, supply increases and price falls, which reduces extra profit.

Abnormal loss imply firms exit from market. So, supply decreases and price increases, which reduces loss.