True or False: In a perfectly competitive market, individual firms have the power to set their own prices above the market equilibrium without losing customers.

Answer options:

True

False

How to approach this question

Recall the characteristics of perfect competition: many buyers/sellers, identical products. Therefore, firms are 'price takers'.

Full Answer

B.False✓ Correct

Firms in a perfectly competitive market are 'price takers'. Because products are homogeneous and there are no barriers to entry, any firm that raises its price above the market rate will sell nothing.

Common mistakes

Confusing perfect competition with monopoly or monopolistic competition.

Question 32 All questions Question 34

Practice the full ACCA BT — Business & Technology Practice Exam 6

52 questions · hints · full answers · grading

More questions from this exam

Q01AeroFarms, a vertical farming startup, is planning to build a massive indoor facility in an urban...Medium Q02AstroMine Inc. is a commercial space exploration company preparing to extract rare earth metals f...Medium Q03SynthoMeat Ltd produces lab-grown synthetic beef. Recently, the price of traditional farmed beef ...Hard Q04StreamForge is a new esports broadcasting platform. The industry is currently dominated by two ma...Medium Q05A national economy is currently experiencing a prolonged period of 'stagflation'. How is this mac...Medium

View all 52 questions →