Suppose ABC Dairy Is One Firm Competing in the Perfectly

question 43

Multiple Choice

Suppose ABC Dairy is one firm competing in the perfectly competitive market for milk. Now suppose ABC Dairy decides to produce only organic milk. Which of the following best describes the effects of this change in the market?

• A) ABC Dairy is differentiating its product and will likely be able to charge a higher price than before.
• B) ABC Dairy will still be a price taker because it is still operating in a perfectly competitive market.
• C) ABC Dairy will have a monopoly on organic milk due to very high entry barriers.
• D) The other dairy firms will produce with excess capacity, but ABC Dairy will be efficient.

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Definitions:

Nominal Annual Rate

The interest rate stated on a loan or investment agreement, not adjusting for inflation or the compounding of interest.

Developing-Country

A developing country refers to a nation with a lower level of industrialization, lower living standards, and sometimes a lower Human Development Index (HDI) compared to developed countries.

Compounded Monthly

An interest calculation method where interest is added to the principal sum at the end of each month, with each subsequent month earning interest on the new total.

Nominal Rate

The nominal rate is the stated interest rate on a loan or financial product, not adjusted for inflation.