Suppose a Single Egg Farmer Alters the Number of Eggs

question 65

Multiple Choice

Suppose a single egg farmer alters the number of eggs she produces but the change in egg output does not have any effect on the market price. This example describes which of the following characteristics of perfect competition?

• A) large number of small firms
• B) homogeneous product
• C) very easy entry and exit
• D) mutual interdependence

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Definitions:

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price level, at a given point in time.

Price Decreases

A situation where the cost of goods or services lowers over time, often leading to increased consumer purchasing power.

Budget Constraint

The limitations on the purchase of goods and services imposed by a budget, representing the combination of goods and services that a consumer can afford with a fixed income.

Giffen Good

A type of good for which demand increases as its price increases, contradicting the basic laws of demand in economics due to the impact of strong income effects.