2. Questions and Problems 3 Firm A, one firm in a perfectly competitive industry, faces higher costs of production. As a result, will consumers end up paying higher prices? O No, because in a perfectly competitive industry, the more efficient firms with lower costs will drive firm A out of the market. O No, because it is likely illegal to raise prices to cover the higher costs. O Yes, because firm A likely offers a differentiated product that consumers cannot get from other firms. O Yes, because firm A is the only firm in the industry, so consumers must purchase products from firm A at increased prices.

2. Questions and Problems 3 Firm A, one firm in a perfectly competitive industry, faces higher costs of production. As a result, will consumers end up paying higher prices? O No, because in a perfectly competitive industry, the more efficient firms with lower costs will drive firm A out of the market. O No, because it is likely illegal to raise prices to cover the higher costs. O Yes, because firm A likely offers a differentiated product that consumers cannot get from other firms. O Yes, because firm A is the only firm in the industry, so consumers must purchase products from firm A at increased prices.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 2.4P

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