Question

If Van's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, increasing its production would not affect the price at which he can sell engines.A. True

B. False

Answer 1

In a perfectly competitive market, increasing production does not affect the price at which a firm can sell its products.

Step-by-step explanation:

Perfect competition is a market structure where numerous small firms offer identical products, with no single entity having significant market control. Characteristics include a large number of buyers and sellers, homogeneous products, easy entry and exit, perfect information, and no pricing power for individual firms. It serves as an idealized benchmark for economic analysis but is rarely found in reality.

In a perfectly competitive market, the price is determined by the market and is beyond the control of individual firms. Therefore, if Van's Fire Engines were a competitive firm, increasing its production would not affect the price at which it can sell engines. This is because in perfect competition, firms are price takers and must accept the market price.

Answer 2

The given statement is False.

Step-by-step explanation:

If Van's Fire Engines was a competitive firm and would have increased the production of engines, the fixed costs associated will be allocated to more units and will result in a lower cost per engine produced as compared to the less production of units. Therefore Van’s Fire Engines will be able to sell engines at a lower price.