In a perfectly competitive market, an individual firm's inability to sell any amount of the good at a price exceeding the market price is
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Price taking behavior
In a perfectly competitive market, an individual firm is a price taker, meaning:
- It cannot influence the market price by changing its own output.
- The firm can sell any quantity at the prevailing market price, but it cannot charge a higher price because buyers have many alternatives (other firms selling identical products).
- If the firm tries to set a higher price, buyers will simply switch to other sellers, leading to zero sales.
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