Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?
A. A price war will break out, and all of the kids will lower their prices.
B. Each kid will keep his or her price at the original amount.
C. Eventually prices will equalize across all three lemonade stands.
D. Everyone will start to charge 50 cents to maximize revenue.
Answer: C
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A. Increased firm confidence B. Decreased government spending C. Increase in the aggregate price level. D. Increased income taxes
Governments like to know the price elasticity of demand because it helps them determine how changes in sales tax rates will affect:
A. tax revenues. B. government spending. C. income. D. profits.
The total civilian labor force is comprised of
A. all individuals over 16 years of age, whether or not they work or are seeking work. B. only full-time employed individuals between the ages of 18 and 55. C. only the employed. D. the unemployed and the employed.
The store of value function is defined as the
A) double coincidence of wants that is used in the debate over barter versus money. B) pricing of goods and services in one measure. C) exchange of goods and services directly for other goods and services. D) holding of money from one transaction to be used later in another transaction. E) use of money as a medium of exchange.