One Way to Test Whether a Market Is Competitive Is

question 25

Multiple Choice

One way to test whether a market is competitive is to see if the price ________ when more firms enter the market.

• A) falls
• B) stays the same
• C) rises
• D) changes by the reciprocal of the total number of firms

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Definitions:

Cost Function

A mathematical expression that calculates the total cost of producing a certain number of goods or services.

Market Demand

The aggregate quantity of a good or service that all consumers in a market are willing and able to purchase at different prices.

Stackelberg Leader

The Stackelberg leader refers to the dominant firm in a duopoly that makes its production decision first, thereby influencing the market actions of the following competitor.

Marginal Cost

The extra charge incurred upon the production of an additional good or service unit.