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an individual seller in perfect competition will not sell at a price lower than the market price because question 6 options: demand for the product will exceed supply. the seller would start a price war. the seller can sell any quantity she wants at the prevailing market price. demand is perfectly inelastic.

User HardLuck
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2.8k points

2 Answers

27 votes
27 votes

Final answer:

A seller in perfect competition will not sell below the market price because they can sell any amount at that price and because the market's perfect elasticity means that price changes do not affect demand. Lowering the price would only reduce revenue and not increase sales.

Step-by-step explanation:

An individual seller in perfect competition will not sell at a price lower than the market price because the seller can sell any quantity he or she wants at the prevailing market price. In a perfect competition, the demand the firm faces is perfectly elastic, meaning consumers are willing to buy any quantity at the market price but none below or above it. Therefore, lowering the price would not increase sales or revenue, but would only reduce the seller's total revenue.

The concept of perfect competition assumes that no single seller can influence the market price or market conditions. Any attempt to sell at a lower price would not start a price war, and it would not benefit the seller since the quantity sold could be the same at the higher market price. Producing additional quantities would also lead to increased costs, so the firm's profits are maximized when they produce where marginal cost equals marginal revenue, which corresponds to the market price.

User Thufir
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3.0k points
13 votes
13 votes

Answer:

No

Step-by-step explanation:

None of these options are correct. The individual seller in the perfect competition will not sell at a price lower than the market price because they are price takers and cannot set their prices. Instead, the forces of demand and supply determine the market price, and the individual seller must accept this price.

User Shay Altman
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3.1k points