Answer to Question #48531 in Microeconomics for Yoyo

Question

Explain why the statement is True, False, or Uncertain according to economic principles. Since firms operating in a perfectly competitive market can sell as much as they produce at the market price, they should produce as much as they can.

Answer 1

In the perfectly competitive market firms can sell only the equilibrium quantity of goods at the equilibrium price. This quantity is equal to the quantity of goods, that buyers are ready to buy at the equal price. That’s why firms should not produce as much as they can, because it will be the excess of goods. Statement is false