The demand for the product of a competitive price-taker firm is:
a. perfectly inelastic.
b. perfectly elastic.
c. greater than zero but less than one.
d. dependent on the availability of substitutes for the firm's product.
QUESTION 2Sally recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Sally's income elasticity for steak dinners is:
a. 0.5.
b. 0.75.
c. 1.5.
d. 2.0.
QUESTION 3Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?
a. The short-run average total costs of firms that are price takers will be constant.
b. If a price taker increased its price, consumers would buy from other suppliers.
c. Firms in a price-taker market will have to advertise in order to increase sales.
d. There are no good substitutes for the product supplied by a firm that is a price taker.
QUESTION 4Which of the following is true for a lower price elasticity of demand coefficient?
a. The market is broadly defined.
b. The quantity demanded is more responsive.
c. Few substitutes exist.
d. Many substitutes exist.
e. All of these.
QUESTION 5A firm that is a price taker can:
a. substantially change the market price of its product by changing its level of production.
b. sell all of its output at the market price.
c. sell some of its output at a price higher than the market price.
d. decide what price to charge for its product.
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