When Firms Are Said to Be Price Takers, It Implies

question 204

Multiple Choice

When firms are said to be price takers, it implies that if a firm raises its price,

• A)buyers will go elsewhere.
• B)buyers will pay the higher price in the short run.
• C)competitors will also raise their prices.
• D)firms in the industry will exercise market power.

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Definitions:

Concentration Ratio

A measure used in economics to assess the extent of market control by the top firms in an industry.

Oligopolies

A market structure characterized by a small number of large firms that dominate the market, often leading to limited competition and higher prices.

Collusion

An agreement, often illegal, between firms to limit competition by fixing prices, dividing markets, or coordinating production.

Concentration Ratio

A measure of the total output produced in an industry by a given number of firms, usually the largest in the industry, indicating the degree of market concentration.