Firms in perfectly competitive markets can reduce their prices in order to capture market share and earn greater profits in the short run. T/F

Question

Firms in perfectly competitive markets can reduce their prices in order to capture market share and earn greater profits in the short run.

a. True

b. False

Answer 1

In Competitive market firms are price takers and can not increase profits by reducing prices. They can already sell as much as the want at the existing price.