Question

In: Economics

Which of the following statements are true about a competitive price-searcher market? Firms are not price...

Which of the following statements are true about a competitive price-searcher market?

Firms are not price takers.

Price equals average total cost in the long run.

Firms earn positive profit in the long run.

Firms are price takers.

Solutions

Expert Solution

Solution-

Which of the following statements are true about a competitive price-searcher market?

The correct answers are

A. Firms are not price takers.

B. Price equals average total cost in the long run.

Reason-

Competitive price ­searcher markets are characterized by differentiated product offerings among firms and low entry barriers. Differentiated products imply that each firm faces a downward­sloping demand curve, so that firms are not price takers but price searchers. Low entry barriers imply that such markets are competitive. That is, the profit of each firm is driven to zero in the long run as the demand for each firm's product adjusts with the entry and exit of other firms until price equals average total cost. Additionally, a downward­sloping demand curve entails that price exceeds marginal revenue, because as a firm expands output, prices of units previously sold at higher prices must fall.


Related Solutions

Which statement is not true for a perfectly competitive market? * a-Firms are price takers b-Only...
Which statement is not true for a perfectly competitive market? * a-Firms are price takers b-Only one seller. c-Many buyers. d-No barriers to entry or exit. For a perfectly competitive firm, if total revenue is less than total cost but greater than total variable cost, that means: * a-Price is below average variable cost only b-Price is above average total cost only c-Price is below average total cost but above average variable cost d-Price is below both average total cost...
Which of the following is true about both a perfectly competitive market and a market with...
Which of the following is true about both a perfectly competitive market and a market with a monopolist who is able to achieve perfect price discrimination a. Deadweight loss is equal to zero. b. Profit is maximized where price is equal to average total cost. c. The marginal revenue curve is downward sloping. d. Average fixed cost remains constant as quantity increases.
Which of the following statements is true? a In the market for resources, firms use resources...
Which of the following statements is true? a In the market for resources, firms use resources to produce goods and services and try to earn profits by selling them. b In the market for products, households supply their labor, capital, land and entrepreneurship ability to firms, and earn income from them. c A key assumption in the economic models studied in the course is as follows: Households own all resources in the economy. d All of the above. e Only...
Which of the following statements about price elasticity of supply is true?
Which of the following statements about price elasticity of supply is true?Group of answer choices:It is a unit-free measure by using the magnitude change.Its sign shows how sensitive it is to the change in price.It is normally positive due to the law of supply.It is a direction-free measure by using an initial value.
Which of the following statements about price elasticity of supply is true? a. It is a...
Which of the following statements about price elasticity of supply is true? a. It is a direction-free measure by using an initial value. b. It is normally positive due to the law of supply. c. It is a unit-free measure by using the magnitude change. d. Its sign shows how sensitive it is to the change in price. Income elasticity of demand and cross-price elasticity of demand are always calculated by using a _______ method because there is always a...
Which of the following statements about a competitive firm's supply curve is true? The short and...
Which of the following statements about a competitive firm's supply curve is true? The short and long run supply curves are the MC curve above ATC. The short run supply curve is the LMC curve above the minimum of AVC. The long run supply curve is perfectly elastic at the minimum of long run average cost. None of the other answers is correct. The short and long run supply curves are the SMC curve above AVC.
1) Which of the following statements is true? A. A change in the market price can...
1) Which of the following statements is true? A. A change in the market price can only shift the demand curve. B. A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand. C. If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. D. If demand decreases and supply increases one cannot determine if equilibrium price will increase or...
Which of the following is most accurate? perfectly competitive firms are price takers. monopolistically competitive firms...
Which of the following is most accurate? perfectly competitive firms are price takers. monopolistically competitive firms offer a differnetiated product. In a duopoly, only two firms are competing Monopolies use the rule MR=MC to maximize profit. All the above.
Question. Which of the following is true in a purely competitive, price-taker market with low barriers...
Question. Which of the following is true in a purely competitive, price-taker market with low barriers to entry? Multiple Choice A. In the long run, firms will produce the quantity of output that minimizes per unit costs (ATC) of production. B. If economic profits are present in the short run, new firms will enter the industry, driving down prices until the industry returns to zero economic profits. C. Firms produce identical products. D. All of the above statements are true.
In a perfectly competitive market: a)firms are price setters. b)firms produce the quantity for which marginal...
In a perfectly competitive market: a)firms are price setters. b)firms produce the quantity for which marginal cost equals price. c)firms can increase profits by charging a price higher than the market price. d)buyers are price setters.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT