Why doesn't a competitive firm reduce its price below the industry price to increase sales?
A competitive firm can sell all it wishes at the going industry price; that is the meaning of a horizontal demand curve. There would be no point to charging less if one can sell all one wants at a higher price. Furthermore, such a policy would result in losses in the long run, where industry price results in zero economic profits and any lower price would result in losses.
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Constant returns to scale (CRS) implies that ________
A) increasing all the factor inputs by the same percentage lead to the same percentage increase in output B) increasing all the factor inputs by the same percentage lead to a higher percentage increase in output C) increasing all the factor inputs by the same percentage lead to a lower percentage increase in output D) increasing all the factor inputs by the same percentage leaves output unchanged E) none of the above
Use the following graph to answer the next question.
What price will this pure monopoly charge?
A. $40 B. $45 C. $50 D. $35