If a Price-Taker Firm Selling in a Competitive Market Offers

question 13

Multiple Choice

If a price-taker firm selling in a competitive market offers its product at a higher price than others, it will

• A) increase its profits.
• B) maintain its profit base if the demand for the product is inelastic.
• C) be able to expand output.
• D) not be able to sell any output.

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Definitions:

Aggregate Demand

Aggregate demand represents the total demand for all goods and services in an economy at a given overall price level and in a given time period.

Investment

The allocation of resources, such as capital, time, or assets, into a project or asset, with the expectation of generating an income or profit.

Spending Multiplier

The spending multiplier is an economic concept that measures the effect of a change in autonomous spending (such as government expenditure or investment) on the total economic output.

Potential Output

Potential Output refers to the highest level of goods and services an economy can produce sustainably, without triggering inflation.