Suppose ABC Dairy is one firm competing in the perfectly competitive market for milk. Now suppose ABC Dairy decides to produce only organic milk. Which of the following best describes the effects of this change in the market?
A) ABC Dairy is differentiating its product and will likely be able to charge a higher price than before.
B) ABC Dairy will still be a price taker because it is still operating in a perfectly competitive market.
C) ABC Dairy will have a monopoly on organic milk due to very high entry barriers.
D) The other dairy firms will produce with excess capacity, but ABC Dairy will be efficient.

Question

Quizplus · Accepted Answer

By differentiating its product to organic milk, ABC Dairy can distinguish its product from conventional milk, potentially allowing it to charge a higher price due to the perceived higher value or quality of organic milk compared to non-organic options.

Suppose ABC Dairy Is One Firm Competing in the Perfectly