Assume That All Firms in This Industry Have Identical Cost

question 67

Multiple Choice

Assume that all firms in this industry have identical cost functions.
The firm depicted in the graph on the right faces a demand curve that

• A) is horizontal at the market price.
• B) is downward sloping,and less than market demand curve.
• C) is the same as the marginal cost curve.
• D) is the same as the market demand curve.

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Definitions:

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on factors like location, age, or purchase quantity.

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Intermediate Product

A product that is a result of a process but is also used as an input in the production of a final or finished product.

Differential Revenue

The amount of increase or decrease in revenue expected from a particular course of action as compared with an alternative.