Relative to a Competitive Situation, If a Market Lacks Competition

question 107

Multiple Choice

Relative to a competitive situation, if a market lacks competition, economic theory suggests that

• A) output will be lower and price higher.
• B) output will be higher and price lower.
• C) both output and price will be higher.
• D) both output and price will be lower.

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Definitions:

Selling Price

The price of a good or service is established based on considerations like the cost of production, the level of demand in the market, and the presence of competitive products or services.

Absorption Costing

A costing method within accounting that considers all costs involved in manufacturing—including direct materials, direct labor, and all overhead (variable and fixed)—in establishing a product’s price.

Markup Percentage

The percent added to the cost price of goods to cover overhead and profit.

Required Return

The minimum expected return an investor demands for an investment, considering the risk associated with it.