In the market for desk lamps, which of the following best describes the outcome in a perfectly competitive market?

• A. There are significant barriers to entry for new desk lamp producers.
• B. Firms sell desk lamps at a price equal to marginal cost.
• C. Each firm produces a unique type of desk lamp with no close substitutes.
• D. Firms can set prices above the market equilibrium.

Answer: (B)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive market: many firms, identical products, no barriers to entry or exit, and firms are price takers.
2. Recall that in perfect competition, firms cannot influence the market price and must accept the equilibrium price determined by supply and demand.
3. Recognize that firms maximize profit by producing the quantity where marginal cost (MC) equals marginal revenue (MR), and in perfect competition, MR equals the market price (P).
4. Therefore, the equilibrium condition for firms in a perfectly competitive market is \(P = MC\), meaning firms sell their products at a price equal to marginal cost.
5. Evaluate the other options: significant barriers to entry, unique products, or price setting above equilibrium do not align with perfect competition characteristics.