Answer:The answer is False
Step-by-step explanation:
Clancy fire engines is a perfect competitive firm, A perfect market is a situation where there is a strong competition among sellers and buyers when the prices of the commodity traded in the market are about the same. It is also a market in which the producers cannot influence the prices of their products either by reducing or increasing the quantity produced. The market for a product is said to be perfectly competitive if all the following are present
i Existence of a large number of buyers and sellers
ii Free entry and exit for all
iii Homogeneity of the product of all sellers
iv Perfect knowledge regarding the market conditions
Where there are a large number of suppliers of a homogenous product, no supplier can influence the market price and therefore there is no pricing decisions to be made since all the supplier's output could be sold at the ruling market price,the only effect of a decrease in price would be a reduced profit. Similarly, any increase in selling price by any one supplier would result in no sales at all to that supplier as buyers could purchase the same product at a lower market price from any of other suppliers.
Therefore, suppliers must accept the market price, which by indication is their marginal revenue, profit will be maximized by producing and selling up to the point where the marginal cost (MC) of Production and sales equal the marginal revenue (MR) that is the market price.
In addition, in a perfect market there is existence of a single ruling market price. Therefore, the firm in the market is a price taker and not a price maker because, price and quantity in the market are determined by force interplay of demand and supply. In other words, price and quantity in the market are determined by the market mechanism of both demand and supply. In this case, Clancy engines will have to sell at $80,000 market price, it cannot reduce the price from $80,000 to $40,000