单选题
Assume that the market for paper supplies and the market for
toothpicks have the following char acteristics :
The Market for
Paper Supplies is comprised of:
A large number of independent
sellers
Differentiated products
Low barriers
to entry/exit
The Market for Toothpicks is comprised
of:
A large number of independent sellers
Homogeneous products
No barriers to entry/exit
The Papyrus Company operates in the market for paper supplies and Wudden Floss
operates in the toothpick market. The sales managers for both companies want to
know how a change in price will affect the quantity sold. Which of the following
choices best completes the following sentence? If both firms increase prices,
the quantity sold by Papyrus Company will:
- A. increase, and the quantity sold by Wudden Floss will decrease.
- B. decrease, and so will the quantity sold by Wudden Floss.
- C. decrease, and Wudden Floss will sell nothing.
【正确答案】
C
【答案解析】Papyrus Company is an example of a price searcher engaged in monopolistic competition (low barriers to entry). Thus, the company faces a downward sloping demand curve and highly elastic demand. An increase in price will result in fewer units sold. Wudden Floss is an example of a price taker operating in a purely competitive market. Thus, the firm faces a horizontal demand curve and perfectly elastic demand. An increase in price will result in no units sold. In a purely competitive market, the firm must take the market price.