Which of the following statements is true about pricing in competitive, mature markets?

• A. Firms are price takers and cannot influence the market price.
• B. Prices are determined solely by government regulation.
• C. Firms can set prices above the market equilibrium without losing customers.
• D. Individual firms can increase profits by raising prices.

Answer: (A)

Verified step by step guidance

1. Understand the characteristics of a competitive, mature market: many firms, homogeneous products, and free entry and exit.
2. Recall that in such markets, firms are 'price takers,' meaning they accept the market price as given and cannot influence it individually.
3. Recognize that prices are determined by the intersection of market supply and demand, not solely by government regulation.
4. Note that if a firm tries to set a price above the market equilibrium, customers will buy from competitors, so the firm loses sales.
5. Conclude that individual firms cannot increase profits by raising prices because they have no market power to influence the price.