The competitive price-taker model is usually used to illustrate the competitive process. If firms cannot choose their price, where is the competition?
This is a good question. The firms do not compete with price. The products are identical, so there is no competition based on product quality, packaging, advertising, or location. These concepts are all introduced in later market models. Competition does occur in the price-taker model when existing firms earn economic profit. When this occurs, other firms enter and compete the profit away. Firms also compete to keep unit production costs low. Only the firms with low production costs will be able to survive in the market.
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Which of the following is true?
i. The demand for a good is elastic if when its price changes, the percentage change in the quantity demanded exceeds the percentage change in price. ii. Price elasticity of demand equals the percentage change in price divided by the percentage change in the quantity demanded. iii. If demand is price inelastic, a rise in price leads to a decrease in total revenue. A) only i B) only ii C) only iii D) i and ii E) ii and iii
Each year, the United States exports about 50 percent of its wheat crop
Indicate whether the statement is true or false
You have a bond that pays $60 per year in coupon payments. Which of the following would result in a decrease in the price of your bond?
A) Coupon payments on newly-issued bonds rise to $75 per year. B) The likelihood that the firm issuing your bond will default on debt decreases. C) Coupon payments on newly-issued bonds fall to $40 per year. D) The price of a share of stock in the company rises.
Because government services are not sold in markets,
A) they are excluded from measurements of GDP. B) the government tries to estimate their market value and uses this to measure the government's contribution to GDP. C) they are valued at their cost of production. D) taxes are used to value their contribution.