Answered: In perfect competition, firms set price…

In perfect competition, firms set price equal to marginal cost. Why can’t firms do this when there are internal economies of scale? Explain the answer.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: Perfect Competition

Section: Chapter Questions

Problem 7WNG

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Question

In perfect competition, firms set price equal to marginal cost. Why can’t firms do this when there are internal economies of scale? Explain the answer.

Definition Definition Structure of the market that exists when many buyers and sellers exchange similar commodities and prices are fixed by market forces, demand, and supply. When there is perfect competition, a single business cannot impact the price or market value of the homogenous product.

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