Consider the Demand Curves Facing Two Firms: for Curve 1

question 117

Multiple Choice

Consider the demand curves facing two firms: For curve 1, a $4 decrease in price increases quantity demanded by 2 units. For curve 2, a $3 decrease in price increases quantity demanded by 1 unit. Curve _____ is steeper, so an expansion of output drives down marginal revenue more along _____.

• A) 2; curve 2 than curve 1
• B) 2; curve 1 than curve 2
• C) 1; curve 1 than curve 2
• D) 1; curve 2 than curve 1

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Definitions:

Price Taker

An entity in a market that must accept prevailing prices and lacks the power to influence them due to its small market share.

Identical Products

Goods that are exactly the same in every feature and aspect, making them perfectly substitutable for one another.

Price-Taker Markets

Markets in which individual buyers and sellers have no control over the prices at which they buy or sell goods, typically because the market is highly competitive and goods are standardized.

Dynamic Process

A system or sequence of actions characterized by continuous change, activity, or progress over time.