Multiple Choice QuestionThe resource demand curve of a purely competitive seller is downward sloping because the marginal product of the resource Blank______, whereas the resource demand curve of an imperfectly competitive sellers is downward sloping because the marginal product diminishes and Blank______.Multiple choice question.diminishes; product price falls as output is increasedincreases; product price rises as output is increaseddiminishes; product price falls as output is decreasedincreases; product price rises as output is decreased
Question
Multiple Choice QuestionThe resource demand curve of a purely competitive seller is downward sloping because the marginal product of the resource Blank______, whereas the resource demand curve of an imperfectly competitive sellers is downward sloping because the marginal product diminishes and Blank______.Multiple choice question.diminishes; product price falls as output is increasedincreases; product price rises as output is increaseddiminishes; product price falls as output is decreasedincreases; product price rises as output is decreased
Solution
The correct answer is "diminishes; product price falls as output is increased".
Here's why:
-
In a purely competitive market, as more of a resource is used, the additional output (marginal product) that each additional unit of the resource can produce tends to decrease. This is due to the law of diminishing marginal returns. As a result, the resource demand curve is downward sloping.
-
In an imperfectly competitive market, sellers have some control over the price of their product. As they increase output, they often have to lower the price to sell the additional units. This means that the additional revenue (marginal revenue) they get from selling each additional unit decreases. Since the marginal product of the resource also diminishes, the decrease in marginal revenue makes the resource less valuable to the seller. Therefore, the resource demand curve is also downward sloping.
Similar Questions
Multiple Choice QuestionUnder pure competition, product price is Blank______, therefore the downward slope of the demand curve is due solely to the decline in the resource's marginal product, or the law of Blank______.Multiple choice question.constant; demandnegative; diminishing returnsconstant; diminishing returnsconstant; supplypositive; diminishing returns
Multiple Choice QuestionThe imperfect competitor's relative reluctance to employ more resources and produce more output when resource prices fall reflects its Blank______.Multiple choice question.rising marginal costsfalling marginal coststendency to restrict output in the product marketmarginal revenue first rising and then falling
Multiple Choice QuestionThe marginal revenue product (MRP) of the imperfectly competitive seller falls for two reasons, because Blank______.Multiple choice question.MP diminishes and product price rises as output increasesMP rises and product price falls as output increasesMP diminishes and product price falls as output increasesMP diminishes and product price falls as output decreases
Multiple Choice QuestionThe derived demand for resources by producers for a product will be low when Blank______.Multiple choice question.supply is low for the productconsumer demand is high for the productsupply is high for the productthe product is selling poorly
Multiple Choice QuestionWhat type of market is described by a constant product price and a downward sloping resource demand curve caused by a decline in marginal product?Multiple choice question.pure competitionmonopolyoligopolymonopolistic competition
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.