If a Perfectly Competitive Firm Raised the Price of Its

question 242

Multiple Choice

If a perfectly competitive firm raised the price of its product,

• A) its profits would increase.
• B) the quantity of output it sells decreases to zero.
• C) rival firms will follow suit and raise their prices also.
• D) the firm will be forced to advertise more.
• E) its total revenue would rise but its total cost would rise by more.

Analyze the impact of substitutes on the elasticity of demand for resources.

Understand the relationship between the elasticity of demand for labor and the elasticity of demand for the product it produces.

Recognize how a firm's degree of monopoly power affects its resource demand elasticity.

Comprehend the relationship between resource demand elasticity and marginal revenue product curves.

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Definitions:

Network Effects

Network effects occur when the value of a product or service increases as more people use it, making it more attractive and beneficial to users.

Simultaneous Consumption

The same-time derivation of utility from some product by a large number of consumers.

Specialized Inputs

Resources or materials that are tailored for specific tasks or industries, enhancing the efficiency and quality of production.

Rent-Seeking Behavior

Activities by individuals or firms aimed at securing economic gain without contributing to productivity, typically through political lobbying for favorable regulations or monopolistic advantages.