Question

Question 28 2 pts Why do perfectly competitive firms sell their products only at the market price? Firms can sell their goods above the market price because firms are considered price takers. If a firm charges more than other firms, it will sell nothing; it has no incentive to sell at a lower price. Firms can sell their goods above the market price because firms are considered price makers. If a firm charges less than other firms, it will be able to sell more but its costs will be higher.

Answer 1

Question 28.
d) If a firm charges less than other firms, it will be able to sell more but its costs will be higher.
Reason - In a perfectly competitive market, the firms are price takers, where the market price is set at point equal to its marginal cost. Now, if a firm decides to decrease its prices, it could sell more, however the cost of production will exceed its revenue and it will incur loss. Thus, it will produce at market price.

Question 8.
d) 1
Reason - Economies of scale will take place when the average total cost decreases as the output of the firm increases, which is given by point 1 in the graph.

Question 10.
c) the entrepreneur's forgone wages
Reason - Forgone wages are considered as implicit costs rather than an explicit costs because this is a payment which the entrepreneur gives up in order to purchase or set up his business. Therefore, this is an opportunity cost of the entrepreneur.