The "Invisible Hand" in a Competitive Market Pushes the Firms

question 101

Multiple Choice

The "invisible hand" in a competitive market pushes the firms in the market to

• A) charge a price that is equal to their marginal revenue.
• B) produce an output level that allows them to earn some positive economic profits.
• C) use resources and produce output that maximize consumer and produce surplus.
• D) operate where their individual demand curve is above their long-run average cost curve.

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Definitions:

Inelastic Demand

A situation where the demand for a product does not change significantly with a change in price.

More Elastic Demand

A situation where the demand for a product is more sensitive to changes in price, meaning quantities demanded change significantly even with small price fluctuations.

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior business position compared to its competitors.

Foundation for Success

The essential elements or conditions that must be in place to achieve positive outcomes or success.