Question

In: Economics

Which of the following statements does NOT reflect a price-taking firm? a. If the firm were...

Which of the following statements does NOT reflect a price-taking firm? a. If the firm were to charge more than the going price, it would sell none of its goods. b. The firm has no incentive to charge less than the going price. c. The firm can sell as much as it wants to sell at the going price. d. Consumers have a major impact on price, not firms.

Solutions

Expert Solution

If the firm were to charge more than ongoing price, it would sell none of its goods.

( Price taking firm exists in a perfect competition market. A firm is a price taker when it has no control over its own price. It can sell as much it wants, but only at the market price. The firm supplies only a small fraction of the total product sold in the market and a firm won't be charging less than the market price for its products. The firm also won't be charging a Higher price. If firm charges a higher price, consumers will purchase from other firms as there are a number of sellers and commodity is homogenous.However firm's revenue won't immediately fall to Zero if it charges a higher price .)


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