Question 1

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
A)restaurants and MP3 players
B)electricity and natural gas
C)corn and satellite radio
D)rice and soybeans

Accepted Answer

The answer of Suppose a firm in each of the...

Question 2

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
A)cotton and soybeans
B)gasoline and corn
C)#2 lead pencils and college textbooks
D)electricity and cable television

Accepted Answer

The demand for #2 lead pencils is relatively inelastic, meaning that a 15% increase in price is unlikely to significantly decrease quantity demanded. On the other hand, the demand for college textbooks is more elastic, as students may be able to find cheaper alternatives or opt out of purchasing altogether, leading to a dramatic decline in sales for the firm in this market.

Question 3

The analysis of competitive firms sheds light on the decisions that lie behind the
A)demand curve.
B)supply curve.
C)way firms make pricing decisions in the not-for-profit sector of the economy.
D)way financial markets set interest rates.

Accepted Answer

The answer of The analysis of competitive firms sheds light...

Question 4

For any competitive market, the supply curve is closely related to the
A)preferences of consumers who purchase products in that market.
B)income tax rates of consumers in that market.
C)firms' costs of production in that market.
D)interest rates on government bonds.

Accepted Answer

The supply curve represents the minimum price at which producers are willing to sell a certain quantity of a good. This price is closely related to the costs of production for firms operating in that market. If the costs of production increase, firms will require a higher price to sell the same quantity of goods, resulting in a shift in the supply curve to the left. If the costs of production decrease, firms will be willing to sell more goods at the same price, resulting in a shift in the supply curve to the right. Therefore, firms' costs of production are closely related to the supply curve for a particular market.

Quiz 14: Firms in Competitive Markets

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

The analysis of competitive firms sheds light on the decisions that lie behind the

For any competitive market, the supply curve is closely related to the