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.marginal revenue first rising and then fallingrising marginal coststendency to restrict output in the product marketfalling marginal costs
Question
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.marginal revenue first rising and then fallingrising marginal coststendency to restrict output in the product marketfalling marginal costs
Solution
The correct answer is "tendency to restrict output in the product market".
Here's why:
An imperfect competitor, such as a monopoly or oligopoly, has the ability to influence the price of its product. This is because they have significant market power and face little competition. When resource prices fall, it becomes cheaper to produce goods. However, an imperfect competitor may not increase production because doing so could lower the price of its product. This is due to the law of supply and demand - if supply (production) increases significantly, prices can fall if demand doesn't keep up. Therefore, the imperfect competitor's relative reluctance to employ more resources and produce more output when resource prices fall reflects its tendency to restrict output in the product market.
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