If a competitive firm is producing a profit-maximizing level of output and chooses to continue operating at a loss :
a. AC > p > AVC
b. MR = MC
c. P = MC
All of the above are true.
A market is said to be competitive if there are many buyers and sellers in the market such that no single buyer or seller has the power to influence market prices. In a competitive market, buyers and sellers take market price as given in their decision making, i.e., act as price-takers.
A completely competitive business must accept the equilibrium price at which it sells its products because it is a price taker. A completely competitive business will not be able to generate any sales if it seeks to charge even a small amount over the going rate.
When there are numerous sellers, it is simple for businesses to enter and leave the market, the items are the same from one seller to the next, and the sellers are price takers, perfect competition arises.
The market structure refers to the characteristics of an industry, including the quantity of vendors, the ease or difficulty of entry for new businesses, and the kinds of goods that are offered for sale.
The following requirements are considered to be present for a firm to be in ideal competition:
Numerous businesses make the same goods.
Both buyers and sellers may find the goods, which is accessible for purchase.
Both buyers and sellers have access to all the information necessary to decide rationally about the goods being purchased and sold.
Without any constraints, businesses are free to enter and quit the market. In other words, there are no barriers preventing this.
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