Why do firms in perfectly competitive markets have no control over the price of their products?
What will be an ideal response?
Firms in competitive markets are price takers, because all firms in the market
produce identical products and each firm is small relative to the size of the market. Raising prices above this price would result in losing all its sales because consumers perceive the products to be identical. Setting a price below this level would not increase the number of consumers but only result in a decline in revenue.
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In a private closed economy, national income is $4.5 trillion and savings equals $6.4 billion. Based on this data, the marginal propensity to consume
A. cannot be calculated from the data given. B. decreases as income increases. C. is less than the average propensity to consume. D. is greater than the marginal propensity to save.
If the quantity of the variable on the y-axis increases by 3 when the quantity of the variable on the x-axis increases by 4, then the slope of the curve equals
A) 3. B) 4. C) 3/4. D) 4/3. E) 1.
The best definition of economics is
A) how choices are made under conditions of scarcity. B) how money is used. C) how goods and services are produced. D) how businesses maximize profits.
In which type of contract is the agent paid per unit of output?
A) A commission based contract. B) A sharecropping contract. C) A piece rate contract. D) A contract with stock options as salary.