Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run (more than one answer is correct)?Both will sell their products at a price equal to average total cost, but only the price-searcher will produce at minimum average total cost.Both will sell their products at a price equal to marginal cost, and only the competitive price searcher will produce at minimum average total cost.Only the price searcher will sell its product at a price equal to marginal cost.Only the competitive price taker will sell its product at a price equal to marginal cost.Both will sell their products at a price equal to average total cost, but only the price-taker will produce at minimum average total cost.

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Asked Oct 28, 2019
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Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run (more than one answer is correct)?

  1. Both will sell their products at a price equal to average total cost, but only the price-searcher will produce at minimum average total cost.
  2. Both will sell their products at a price equal to marginal cost, and only the competitive price searcher will produce at minimum average total cost.
  3. Only the price searcher will sell its product at a price equal to marginal cost.
  4. Only the competitive price taker will sell its product at a price equal to marginal cost.
  5. Both will sell their products at a price equal to average total cost, but only the price-taker will produce at minimum average total cost.

          

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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 and charges price equal to the marginal production cost; that is, P = MC.

However, a price searcher firm (oligopolist) on t...

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