Final answer:
In a perfectly competitive market, firms cannot charge above or below the equilibrium price. Charging more would lead to zero sales, while charging less would reduce profits without increasing sales, as all desired quantity can be sold at the equilibrium price.
Step-by-step explanation:
Perfectly competitive firms are price takers, meaning they cannot set prices above the equilibrium due to the presence of many competitors with identical products. (a) If a perfectly competitive firm charged a price above the equilibrium price, it would be unable to make any sales because consumers can easily switch to a multitude of other sellers offering the product at the lower equilibrium price. Firms in this market have no market power. (b) A perfectly competitive firm won't charge a price lower than the equilibrium price because it would not be maximizing its profits; since it can sell all it wants at the equilibrium price, selling for less would only decrease revenue without increasing sales.