In a perfectly competitive market, if the market price is $5 and my price is $5.01,...

In a perfectly competitive market, if the market price is $5 and my price is $5.01, can I sell all my goods?

Expert Solution

In a perfect competition, there is a large number of firms selling the identical product and no single firm has a control over the price as price is set by the industry, therefore, if any seller tries to charge above the market price then no consumer is going to buy from that firm because, in the perfect competition, there is no asymmetric information that implies both buyers and sellers are well aware about the market price. So if you try to charge above five dollar that implies you cannot sell your goods because buyers are aware that there are other firms selling the same goods at the price five dollar.

Rahul Sunny answered 2 years ago

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