Suppose that a large dairy farmer is able to raise the market price of milk by withholding milk supply from the market.In this instance,

Question

Quizplus · Accepted Answer

If the dairy farmer is able to raise the market price of milk by withholding milk supply from the market, it suggests that the milk market is imperfectly competitive and that the farmer has some degree of market power. In a perfectly competitive market, no single seller or buyer has the ability to affect the market price. By withholding milk supply, the dairy farmer is able to reduce the quantity of milk available in the market, which will likely lead to an increase in the market price. Buyers may respond to the increase in price by either decreasing or increasing demand, depending on how sensitive they are to changes in price. Therefore, the correct answer is D - the milk market is imperfectly competitive.

Suppose That a Large Dairy Farmer Is Able to Raise