If you were running a firm in a perfectly competitive industry, you would be spending your time making decisions on ?
Correct answer: B. how much of each input to use?
- A. how much to spend on advertising?
- B. how much of each input to use?
- C. What price to charge
- D. none of these
Explanation
A perfectly competitive firm is a price taker, so it cannot choose the market price or rely on advertising to differentiate its product. Its key decision is the profit-maximising quantity of inputs and output.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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