9. Which of the following best explains why a price-taker firm faces a horizontal demand curve at the market equilibrium price and a price-searcher firm faces a downward-sloping demand curve?a. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it raises its price.b. A price-taker firm will lose all of its sales if it lowers its price below the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it lowers its price.c. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are differentiated from its competitors. A price-searcher firm produces a product that is identical to its competitors and will lose only some sales if it raises its price.d. A price-taker firm will lose only some of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose all of its sales if it raises its price.

Question
Asked Oct 28, 2019
73 views

9. Which of the following best explains why a price-taker firm faces a horizontal demand curve at the market equilibrium price and a price-searcher firm faces a downward-sloping demand curve?

a. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it raises its price.

b. A price-taker firm will lose all of its sales if it lowers its price below the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it lowers its price.

c. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are differentiated from its competitors. A price-searcher firm produces a product that is identical to its competitors and will lose only some sales if it raises its price.

d. A price-taker firm will lose only some of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose all of its sales if it raises its price.

check_circle

Expert Answer

Step 1

A price taker firm is the firm which takes the prevailing market price of a service or good as given and it unable to affect the market price of any service or good as they all produce and sale identical services or goods in the market. Hence, faces a horizontal demand curve.

A price searcher firm (oligopolist) on the other hand is the firm...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Brief explanation on keynesian model and its diagram

A: Aggregate Demand: It refers to the total demand for goods and services in the economy within a given...

question_answer

Q: What mechanisms allocate resources when the price of agood is not allowed to bring supply and demand...

A: The equilibrium price and quantity are determined by the intersection of demand and supply curves in...

question_answer

Q: Question 10 Consider a firm whose cost function when both L and K are variable is shown in the figur...

A: Total cost: It refers to the total cost incurred while producing the commodity.Marginal Cost: It ref...

question_answer

Q: nheducation.com/flow/connect.html 10 Homework Saved Help Save & E Refer to the table below and suppo...

A: It is mentioned that the expected rate of interest declines by 2% and if the rate of real interest r...

question_answer

Q: Question 2 Suppose that the cost function of a firm is C(q)=4q. Suppose that this is the only firm i...

A: Producer surplus is an advantage taken by the producer due to the variations in the price received a...

question_answer

Q: Hello! Can you help me with the question below?  An econometric study found that the income elastici...

A: Income Elasticity is defined as the percent change in quantity demanded which is divided from the pe...

question_answer

Q: Consider an economy in which the demand for money is of the formMt =(1/v) PtYfor t = 0, 1, 2, · · · ...

A: Given: Mt= (1/v) PtYY= 150, v= 1.5, Money supply = 100 for t=0,1

question_answer

Q: What is a b and c

A: The Consumer surplus is defined as a triangular area that would be understood with the help of the d...

question_answer

Q: How might construction industry job losses affect incomes in the clothing and travel industries?

A: Job losses in the construction industry will adversely affect the income of travel and clothing indu...