There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world. Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?
What will be an ideal response?
Wheat framers are selling identical goods, but fast food restaurants do not sell identical goods. If a wheat farmer raises his price above the market price, he will lose all of his buyers. A McDonald's restaurant can raise its price without losing all of its buyers because it is selling a product that is not identical to the products sold by other restaurants.
You might also like to view...
A family's summer house on Cape Cod pays a return in the form of
A) interest rate. B) capital gains. C) the pleasure of vacations at the beach. D) stock options. E) capital gains and pleasure.
The long run for a business is a period of time
A) longer than a year. B) when most inputs are variable. C) when all inputs can change. D) when labor is the only input used by the business.