Question

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not a. have any fixed costs of production. b. choose the quantity of butter to produce. c. set marginal revenue equal to marginal cost to maximize profit. d. choose the price at which it sells its butter.

Answer 1

Answer: d. choose the price at which it sells its butter.

Explanation:

In a competitive market, the individual sellers do not choose a price to sell at but rather the market does. This is due to the high number of sellers in the market so individual sellers do not have bargaining power.  

The price will therefore equal the firm's marginal revenue as well as Average revenue.