Exhibit 12-1 Refer to Exhibit 12-1.Graphs A and B together demonstrate the effect that a change in market demand has on the demand curve faced by a firm that is:

Question

Exhibit 12-1  Refer to Exhibit 12-1.Graphs A and B together demonstrate the effect that a change in market demand has on the demand curve faced by a firm that is:

Quizplus · Accepted Answer

Graphs A and B show the impact of an increase in market demand on the demand curve faced by a firm that is producing a homogeneous product and is a price taker. This is because the firm cannot influence the market price and must accept it as given. Additionally, the fact that the firm is very small relative to the market output as a whole means that it has no significant impact on the overall market and must therefore adjust to changes in market conditions. Therefore, all of the above options are correct.