If a firm has some degree of market power, then output price ?
Correct answer: B. becomes a decision variable for the firm
- A. no longer influences the amount demand of the firm's product
- B. becomes a decision variable for the firm
- C. is guaranteed to be above a firm's average cost.
- D. is determined by the actions of other firms in the industry
Explanation
With market power, a firm faces a downward-sloping demand curve and can influence the price through its output decision. Price is therefore a decision variable rather than something it must simply accept.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
The cosmetics industry is not considered by economists to be a good example of perfect competition because ?
If firms can neither enter nor leaves an industry, the relevant time period is the ?
A normal rate of profit ?
Market power is ?
A firm will shut down in the short run if ?
A firm in perfectly competitive industry is producing 50 units, its profit-maximising quantity. Industry price is £2 and total fixed costs and total variable cost are £25 and £40 respectively. The firm's economic profit is ?