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    Price Lowering in Perfect Competition

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    Which of the following would occur if a single farm in a perfect competition lowered its price below the long-run equilibrium market price?

    A) all other farms would lower prices too
    B) it would not be maximizing profit
    C) It would get a larger share of the market, and this would be profitable for it.
    D) Other farms would be driven out of the industry.
    E) other farms would enter the industry.

    I chose D for this answer but then I considered A. What do you think and why? Thanks

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    Solution Preview

    In a "perfect competition" market structure, there were many small firms selling ...

    Solution Summary

    Price Lowering is summarized. Equilibrium market prices are found.