Asked by Shakira Robertson on Jun 01, 2024
Verified
In a competitive industry,the competitive firm's profits are
A) independent of the industry in which they compete
B) closely linked to the industry in which they compete
C) determined only by their own differentiated product
D) determined solely by the inelastic demand for their product
Competitive Firm
A company operating in a market where it must compete against others for the same customers or resources, characterized by its efforts to offer better products, prices, or services.
Inelastic Demand
Characterized by a consumer's lack of sensitivity to price changes, resulting in minimal changes in quantity demanded despite fluctuations in price.
- Understand the principle of economic gains and their reduction to nil in the long run within competitive markets.
Verified Answer
GZ
guangjiao zhangJun 06, 2024
Final Answer :
B
Explanation :
Competitive firm's profits are closely linked to the industry in which they compete as they have to sell their products at the prevailing market price. The higher the competition in the industry, the lower the profit margins for the competitive firms. The market demand and supply conditions determine the industry's prevailing market price, which affects the competitive firm's profitability.
Learning Objectives
- Understand the principle of economic gains and their reduction to nil in the long run within competitive markets.
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