Question

The degree of control over its output price that any seller has is limited by

a. the existence of actual competition in the market.

b. the existence of potential competition from producers who might try to enter the market.

c. the elasticity of demand for the product.

d. all of the above

Answer 1

A seller's degree of control over its output price is determined by his Ability to control the output in the market. If there is Greater actual competition in the market, then seller alone cannot reduce the output because of the risk that the other sellers would Increase their output. Moreover, if there is more potential competition such that there are producers whom I try to enter the the market it then also a seller will not be able to freely adjust his market price. The elasticity of demand determines the marginal and total revenue. How much price the seller must put on his output is also determined by the elasticity of demand for the product. For example, a monopolist will always try to to put his price on the elastic portion of the demand curve. Therefore elasticity plays an important role in the producers decision about its output price. So the degree of control over its output price that any seller has is limited by by the existence of actual competition in the market, the existence of potential competition from producers who might try to enter the market, and elasticity of demand for the product.

Therefore, all of the above options are correct.

Hence, option d is correct.