When a Firm Is Referred to as a "Price Taker

question 97

Multiple Choice

When a firm is referred to as a "price taker,"

• A)the firm initially takes price as given and tries to influence it through advertising.
• B)the firm can alter its rate of production and sales without affecting the market price of the product.
• C)the firm will be willing to sell an infinite quantity at the market price.
• D)the demand curve that the firm faces is perfectly inelastic.
• E)the firm can alter the market price as it changes its rate of production.

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Definitions:

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.

Fixed Inputs

Resources used in production that cannot be easily increased or decreased in the short term, such as buildings or machinery.

Variable Inputs

Resources or factors of production whose quantity can be changed in the short term to influence output.

Fixed

Fixed typically refers to costs or assets that do not change in the short term, regardless of the level of output or activity.