A Decrease in the Price That a Price Taker Receives

question 45

Multiple Choice

A decrease in the price that a price taker receives for its output will cause the firm to

• A) increase output and earn a smaller profit.
• B) shut down and leave the industry.
• C) leave output unchanged and earn a smaller profit.
• D) decrease output and earn a smaller profit or a larger loss.
• E) decrease output and increase fixed cost.

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Definitions:

Equilibrium

The state in which market supply and demand balance each other, resulting in stable prices.

Coconuts

Tropical fruits with a hard shell, edible flesh, and a clear liquid inside, often used in food and beverages.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, achieving market balance.

Inverse Demand Function

A mathematical representation showing how price adjusts based on the quantity demanded by consumers.