Harry Smith Sells Wheat in a Price-Taker Market

question 181

Multiple Choice

Harry Smith sells wheat in a price-taker market. With regard to Smith's price and output choices, which of the following is true?

• A) Smith will constantly attempt to increase the price of his product so he can increase his total revenue.
• B) Since the price of his product is dictated by the market, Smith will not have an incentive to control per-unit cost.
• C) Since the price of his product is dictated by the market, Smith has no production decisions to make.
• D) It would be senseless for Smith to try to increase sales by lowering the price of his product.

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Definitions:

Investment Turnover

A measure of a company’s efficiency in using its assets to generate sales or revenue, indicating how quickly investments are converted into income.

Profit Margins

A financial metric that assesses the percentage of profit made from sales after all expenses have been deducted.

Return on Investment

A measure of the profitability of an investment, calculated by dividing the net gains from the investment by its cost.

Investment Turnover

A ratio measuring how efficiently a company generates sales from its inventory investments.