Which of the Following Best Explains Why a Firm in a Perfectly

question 86

Multiple Choice

Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?

• A) The short-run average total costs of firms that are price takers will be constant.
• B) If a price taker increased its price, consumers would buy from other suppliers.
• C) Firms in a price-taker market will have to advertise to increase sales.
• D) There are no good substitutes for the product supplied by a firm that is a price taker.

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Definitions:

Stock Price

The cost of purchasing one share of a company's stock in the market.

Exercise Price

The price at which an option holder can buy (call option) or sell (put option) the underlying asset.

Intrinsic Value

The actual, true value of a company or an asset based on underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

Pure Discount Loan

A type of loan where the borrower receives a sum of money upfront and repays a greater amount at the end of the term, with no periodic interest payments.