Chapter 9.1, Problem 4R

To determine

To state: The ways in which a seller in a perfectly competitive market can raise prices.

Answer to Problem 4R

No, there is no way for a seller in a perfect competition market to raise prices.

Explanation of Solution

There is no way for a seller in a perfectly competitive market to raise prices.

In a perfect competition market, sellers are price takers which means they have to accept the prices determined by the market forces to sell their goods.

Since there are large number of buyers and sellers in a perfectly competitive market, any slight change in the price by the sellers will result in loss of a good chunk of customers.

Therefore, it is nearly impossible for sellers to raise prices in a perfect competition market because then the buyers will shift to other sellers and the firm won’t be able to grab much sales which ultimately will affect the profitability of the firm in the long run.

Economics Concept Introduction

Introduction: In a perfectly competitive market, sellers are price takers and not price makers. They have no or zero control over the market price. They cannot influence the market prices of their goods and services