Question

Consider a perfectly competitive market in which all firms have the same costs. Choose the statement that is incorrect.
A. Each firm takes the market price as given and produces its profit-maximizing output.
B. The market demand is perfectly elastic at the market price. °
C. Market demand and market supply determine the market price and market output.
D. The market supply curve is upward sloping at prices above the firm's shutdown price.

Answer 1

Answer:

B. The market demand is perfectly elastic at the market price. °

Explanation:

As we know that in the case of perfect competitive market there is a big number of sellers and buyers who sells same kind of product, there is no entry and exit barriers also the firm is a price taker

In addition to this, the market price and output would be measured by the supply and demand force. The profit maximizing output for every firm would considered the market price with the prescribed output and at the time when firm is shutdown so the market price would below the average variable cost

So the option b is incorrect