Asked by LYNETTA White on Jul 05, 2024
Verified
Brand X is one of many firms in a competitive industry where each firm has a constant marginal cost of 2 dollars per unit of output.If marginal cost for Brand X rises to 4 dollars per unit and marginal costs of all other firms in the industry stay constant, by how much does the price in the industry increase?
A) 2 dollars
B) 1 dollar
C) 0 dollar
D) 2/n, where n is the number of firms in the industry
E) None of the above.
Marginal Cost
The cost of producing one additional unit of a product.
Industry Price
The average or standard price of goods or services within a specific industry, influenced by factors like demand, supply, and competition.
- Comprehend the principle of maximizing profits and how it is applied across various market configurations.
- Use mathematical strategies to find the best level of output and pricing models for enterprises under varying conditions.
Verified Answer
DF
Donesha FerrellJul 07, 2024
Final Answer :
C
Explanation :
In a competitive industry, the price is determined by the market supply and demand, not by the cost of a single firm. If only Brand X's marginal cost increases while all other firms' costs remain constant, the overall market supply and price are unlikely to be significantly affected, especially if there are many firms in the industry. Thus, the price in the industry does not increase as a result of the cost increase for one firm.
Learning Objectives
- Comprehend the principle of maximizing profits and how it is applied across various market configurations.
- Use mathematical strategies to find the best level of output and pricing models for enterprises under varying conditions.
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