Multiple Choice QuestionWhy is a purely competitive seller's resource demand curve more elastic than an imperfectly competitive seller operating in a monopoly, oligopoly, or monopolistic competition?Multiple choice question.Sellers in imperfect competition must raise prices to sell more, thus expanding labor by a higher percentage than purely competitive sellers.Sellers operating in imperfect competition must keep prices the same, thus expanding labor by the same percentage as purely competitive sellers.Sellers in imperfect competition must lower prices to sell more, thus expanding labor by a lower percentage than purely competitive sellers.
Question
Multiple Choice QuestionWhy is a purely competitive seller's resource demand curve more elastic than an imperfectly competitive seller operating in a monopoly, oligopoly, or monopolistic competition?Multiple choice question.Sellers in imperfect competition must raise prices to sell more, thus expanding labor by a higher percentage than purely competitive sellers.Sellers operating in imperfect competition must keep prices the same, thus expanding labor by the same percentage as purely competitive sellers.Sellers in imperfect competition must lower prices to sell more, thus expanding labor by a lower percentage than purely competitive sellers.
Solution
The correct answer is: "Sellers in imperfect competition must raise prices to sell more, thus expanding labor by a higher percentage than purely competitive sellers."
This is because in a purely competitive market, sellers are price takers, meaning they have no control over the price of the product they are selling. They can sell as much as they want at the market price. Therefore, they can increase their labor force without having to increase the price of their product, making their resource demand curve more elastic.
On the other hand, sellers in imperfect competition are price makers. They have some control over the price of their product. If they want to sell more, they often have to lower their price. This means they have to increase their labor force by a higher percentage than purely competitive sellers to sell the same amount of product, making their resource demand curve less elastic.
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