If a firm can raise market price by reducing its output,then
A)It has no market power.
B)It faces a downward-sloping demand curve.
C)It is a price taker.
D)It engages in marginal cost pricing.

Question

Quizplus · Accepted Answer

If a firm can raise market price by reducing its output, it means that it has a certain degree of market power, and it faces a downward-sloping demand curve. This is because the demand for the firm's product is not perfectly elastic, and reducing output allows the firm to restrict supply and increase the market price. A firm that is a price taker has no market power, and it has to accept the market price. Marginal cost pricing means setting the price equal to the marginal cost, which may not allow the firm to raise the market price by reducing its output.

If a Firm Can Raise Market Price by Reducing Its