If a firm happened to be the only seller of a particular product, it might behav

Question

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

Hint: Think about the shape of the long-run supply curve in a perfectly competitive market.

there is free entry and exit.

buyers have full information about the firm's price.

the transaction costs of doing business with this firm are low.

there are many buyers.

there is free entry and exit.

buyers have full information about the firm's price.

the transaction costs of doing business with this firm are low.

there are many buyers.

Explanation / Answer

Solution-

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as there is free entry and exit.

The correct option is A. there is free entry and exit.

Reason-

As long as there is free access and exit, the firm may behave as a price taker when the firm determines to set a higher price, when the new firm attracts them. The sooner the number of firms decreases, the price will increase. Each firm will have a small portion of market demand. They can not affect the price individually, so they buy the price.

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