In a perfectly competitive dairy market, firms can increase their prices above the equilibrium price to maximize profits without losing customers.

In a perfectly competitive dairy market, firms cannot increase their prices above the equilibrium price without losing customers. This is because there are many producers offering identical products, such as milk, so consumers will simply buy from another seller if one firm tries to charge more. For example, if a dairy farmer decides to raise the price of their milk from $3 per gallon to $4, customers will likely choose to buy from other farmers who still sell it at $3. In this type of market, firms are price takers, meaning they must accept the market price set by supply and demand. Therefore, to maximize profits, they need to focus on reducing costs or increasing efficiency rather than raising prices.