When the demand for an imperfect competitor's product is greater than it planned,the firm will
A)increase the price of the product until supply equals demand.
B)meet the demand at its set price.
C)reduce the price until supply equals demand.
D)allow a shortage of the product to develop, without changing the product's price.

Question

Quizplus · Accepted Answer

An imperfectly competitive firm has some control over the price it charges for its product. When demand for its product is greater than initially planned, it makes sense for the firm to meet the demand at its set price, as this will maximize profits. In this scenario, the firm does not need to reduce prices, as customers are willing to pay the current price. Similarly, increasing prices will likely reduce demand and potentially lead to lost sales. Allowing a shortage to develop without changing the price is not a practical option, as customers may turn to competitors and the firm risks losing market share. Therefore, the best choice for the firm is to meet the demand at its set price.

When the Demand for an Imperfect Competitor's Product Is Greater