Final answer:
The incorrect statement about a firm in perfect competition is that it can influence market demand by advertising. In perfect competition, firms are price takers, unable to affect the market price established by overall market demand and supply. The firm's marginal revenue is equal to the market price, and its demand curve is horizontal.
Step-by-step explanation:
The statement that is not true regarding a firm in perfect competition is 'D. A single firm can influence the demand for its product by advertising.' In a perfect competition scenario, each firm is a price taker due to the market being composed of many sellers who all offer identical products. As a result, the market price is determined by the overall market demand and supply, and an individual firm cannot influence the market price through advertising.
A firm in perfect competition operates where its marginal revenue (MR) is equal to the market price and its demand curve is perfectly elastic, meaning that it can sell any quantity of its product at the market-determined price. A perfectly competitive firm’s profit maximizing level of output occurs where MR equals marginal cost (MC), and in perfect competition, MR is always equal to the price (MR = P).
In summary, the key characteristics of perfect competition include the inability to influence price, a horizontal demand curve for the firm's product, and a marginal revenue function equal to the market price for all firms within the market.