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According to the source, what happens if a firm in a perfectly competitive market raises the price of its product by even a penny above the market price?
AIts competitors are forced to match the higher price
BIt loses all of its sales to competitors
CIt gains a small increase in market share
DNothing changes, since buyers cannot tell the difference
Answer & Solution
Correct answer: B. It loses all of its sales to competitors
1. Because products are identical across many competing sellers, buyers have no reason to pay more from any one seller.
2. Raising the price even slightly sends every buyer to a competitor selling the identical product at the market price.
3. The firm loses all of its sales, not just some.
4. Competitors have no reason to raise their own price just because one seller tried and failed to do so.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.1 | Perfect Competition and Why It Matters_
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