Answer :
The correct option is B. For the firm is operating in a competitive market price in the market would decrease, and the firm's profit-maximizing output would decrease.
A market is said to be competitive when there are many buyers and sellers and no one buyer or seller has any control over the price of the items being sold. Perfect competition is another name for a market that is competitive. No one controls the market in a competitive one, and there is no distinction between the competing businesses' products in terms of quality, cost, or volume. Understanding that competitive markets are hypothetical and not actual is among the most crucial things to do. Although some markets meet the conditions and exhibit the traits of a competitive market or perfect competition, none of them actually do.
Suppose a firm is operating in a competitive market and is maximizing profit by producing at the point where marginal revenue equals marginal cost. Now suppose that consumer wealth decreases (and the good is a normal good). What might you expect to happen to the price and the profit-maximizing output of the firm?
A. Price in the market would increase, and the firm's profit-maximizing output would increase.
B. Price in the market would decrease, and the firm's profit-maximizing output would decrease.
C. Price in the market would decrease, and the firm's profit-maximizing output would increase.
D. Price in the market would increase, and the firm's profit-maximizing output would decrease.
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