CA Foundation Exam > CA Foundation Questions > Price taker firms _________a)Do not advertise...
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Price taker firms _________
- a)Do not advertise their product because it misleads the customers
- b)Advertise their products to boost the level of demand
- c)Do not advertise but give gifts along with the sold items to attract customers
- d)Do not advertise because they can sell as much as they wish at the prevailing price
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Price taker firms _________a)Do not advertise their product because it...
Price taker firms do not advertise because they can sell as much as they wish at the prevailing price.
Price taker firms are businesses that operate in a perfectly competitive market where they have no control over the price of their product. In other words, they have to accept the market price as given and cannot influence it through their actions. As a result, these firms do not advertise their products.
1. Nature of a price taker firm:
- Price taker firms are small players in the market and have no market power.
- They have a large number of competitors selling similar products.
- They have no control over the price and have to accept the prevailing market price.
- They are price takers, meaning they have to take the price determined by the market.
2. Selling as much as they wish at the prevailing price:
- Price taker firms can sell as much of their product as they wish at the prevailing market price.
- Since they have no control over the price, they do not need to advertise to attract customers.
- The demand for their product is determined by market conditions, and they can sell as much as the market demands at the given price.
3. Advertising is unnecessary for price taker firms:
- Price taker firms do not need to advertise their products because they do not influence the market price.
- Advertising is typically used to create brand awareness, differentiate products, and attract customers.
- Since price taker firms offer homogenous products and have no control over the price, advertising would not significantly impact their sales.
- Instead of investing in advertising, price taker firms focus on minimizing costs and maximizing efficiency to remain competitive in the market.
In conclusion, price taker firms do not advertise their products because they have no control over the price and can sell as much as they wish at the prevailing market price. They focus on optimizing their operations and minimizing costs to remain competitive in the market.
Explanation:
Price taker firms are businesses that operate in a perfectly competitive market where they have no control over the price of their product. In other words, they have to accept the market price as given and cannot influence it through their actions. As a result, these firms do not advertise their products.
1. Nature of a price taker firm:
- Price taker firms are small players in the market and have no market power.
- They have a large number of competitors selling similar products.
- They have no control over the price and have to accept the prevailing market price.
- They are price takers, meaning they have to take the price determined by the market.
2. Selling as much as they wish at the prevailing price:
- Price taker firms can sell as much of their product as they wish at the prevailing market price.
- Since they have no control over the price, they do not need to advertise to attract customers.
- The demand for their product is determined by market conditions, and they can sell as much as the market demands at the given price.
3. Advertising is unnecessary for price taker firms:
- Price taker firms do not need to advertise their products because they do not influence the market price.
- Advertising is typically used to create brand awareness, differentiate products, and attract customers.
- Since price taker firms offer homogenous products and have no control over the price, advertising would not significantly impact their sales.
- Instead of investing in advertising, price taker firms focus on minimizing costs and maximizing efficiency to remain competitive in the market.
In conclusion, price taker firms do not advertise their products because they have no control over the price and can sell as much as they wish at the prevailing market price. They focus on optimizing their operations and minimizing costs to remain competitive in the market.
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Community Answer
Price taker firms _________a)Do not advertise their product because it...
Price taker firms are firms that operate in a perfectly competitive market where they have no control over the price of their product. They have to accept the prevailing market price set by the forces of supply and demand. As a result, price taker firms have certain characteristics:
1. Lack of advertising:
Price taker firms do not advertise their products extensively because they cannot influence the market price through advertising. Since they have no control over the price, advertising would not significantly impact their sales or profits. Furthermore, advertising can be costly, and price taker firms usually operate on thin profit margins, making it uneconomical to invest in advertising.
2. Focus on selling at the prevailing price:
Price taker firms focus on maximizing their sales volume rather than the price of their product. They can sell as much as they wish at the prevailing market price because they are price takers. Therefore, their primary objective is to produce and sell as much as possible to maximize their revenue and market share.
3. No need for promotional tactics:
Since price taker firms can sell all their output at the prevailing market price, they do not need to resort to promotional tactics like giving gifts or freebies to attract customers. These tactics are often used by firms that have some pricing power and want to differentiate their product in the market. Price taker firms do not have the luxury of such strategies because they have no control over the price.
4. Emphasis on cost efficiency:
Price taker firms place a strong emphasis on cost efficiency to remain competitive. Since they cannot influence the price, they must focus on minimizing their production costs to maintain profitability. This often involves implementing cost-saving measures, optimizing production processes, and seeking economies of scale.
In conclusion, price taker firms do not advertise extensively because they cannot influence the market price. They focus on selling at the prevailing price, do not need promotional tactics, and prioritize cost efficiency to remain competitive in the market.
1. Lack of advertising:
Price taker firms do not advertise their products extensively because they cannot influence the market price through advertising. Since they have no control over the price, advertising would not significantly impact their sales or profits. Furthermore, advertising can be costly, and price taker firms usually operate on thin profit margins, making it uneconomical to invest in advertising.
2. Focus on selling at the prevailing price:
Price taker firms focus on maximizing their sales volume rather than the price of their product. They can sell as much as they wish at the prevailing market price because they are price takers. Therefore, their primary objective is to produce and sell as much as possible to maximize their revenue and market share.
3. No need for promotional tactics:
Since price taker firms can sell all their output at the prevailing market price, they do not need to resort to promotional tactics like giving gifts or freebies to attract customers. These tactics are often used by firms that have some pricing power and want to differentiate their product in the market. Price taker firms do not have the luxury of such strategies because they have no control over the price.
4. Emphasis on cost efficiency:
Price taker firms place a strong emphasis on cost efficiency to remain competitive. Since they cannot influence the price, they must focus on minimizing their production costs to maintain profitability. This often involves implementing cost-saving measures, optimizing production processes, and seeking economies of scale.
In conclusion, price taker firms do not advertise extensively because they cannot influence the market price. They focus on selling at the prevailing price, do not need promotional tactics, and prioritize cost efficiency to remain competitive in the market.
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Price taker firms _________a)Do not advertise their product because it misleads the customersb)Advertise their products to boost the level of demandc)Do not advertise but give gifts along with the sold items to attract customersd)Do not advertise because they can sell as much as they wish at the prevailing priceCorrect answer is option 'D'. Can you explain this answer?
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