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Which of the following statements is incorrect?
- a)Even monopolistic can earn losses.
- b)Firms in a perfectly competitive market are price takers.
- c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.
- d)Kinked demand curve is related to an oligopolistic market.
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Which of the following statements is incorrect?a)Even monopolistic can...
Explanation:
In a perfectly competitive market, firms are price takers, meaning they have no control over the price of their product. They must accept the market price as given and adjust their quantity of output accordingly. Therefore, statement c) "It is always beneficial for a firm in a perfectly competitive market to discriminate prices" is incorrect.
Perfectly Competitive Market:
- In a perfectly competitive market, there are many firms selling identical products.
- The market is characterized by free entry and exit, meaning new firms can easily enter the market and existing firms can exit if they are not profitable.
- There is perfect information available to both buyers and sellers.
- Firms in this market have no market power and are price takers.
Price Discrimination:
- Price discrimination refers to the practice of charging different prices to different customers for the same product or service.
- It can be beneficial for firms in certain market structures, such as monopolies or oligopolies, where they have some degree of market power.
- However, in a perfectly competitive market, where firms have no market power, price discrimination is not beneficial.
Reasons why price discrimination is not beneficial in a perfectly competitive market:
1. Homogeneity of the product: In a perfectly competitive market, all firms sell identical products. Therefore, there is no basis for price discrimination as customers have no reason to pay a higher price for the same product.
2. Perfect information: In a perfectly competitive market, buyers have perfect information about prices. If a firm tries to charge different prices to different customers, this information will quickly spread, and customers will switch to the lower-priced seller. This eliminates any benefit the firm might have gained from price discrimination.
3. No market power: Firms in a perfectly competitive market have no market power. They cannot influence the market price and must accept it as given. Therefore, they do not have the ability to set different prices for different customers.
Conclusion:
In a perfectly competitive market, firms are price takers and do not have the ability to discriminate prices. Therefore, statement c) "It is always beneficial for a firm in a perfectly competitive market to discriminate prices" is incorrect.
In a perfectly competitive market, firms are price takers, meaning they have no control over the price of their product. They must accept the market price as given and adjust their quantity of output accordingly. Therefore, statement c) "It is always beneficial for a firm in a perfectly competitive market to discriminate prices" is incorrect.
Perfectly Competitive Market:
- In a perfectly competitive market, there are many firms selling identical products.
- The market is characterized by free entry and exit, meaning new firms can easily enter the market and existing firms can exit if they are not profitable.
- There is perfect information available to both buyers and sellers.
- Firms in this market have no market power and are price takers.
Price Discrimination:
- Price discrimination refers to the practice of charging different prices to different customers for the same product or service.
- It can be beneficial for firms in certain market structures, such as monopolies or oligopolies, where they have some degree of market power.
- However, in a perfectly competitive market, where firms have no market power, price discrimination is not beneficial.
Reasons why price discrimination is not beneficial in a perfectly competitive market:
1. Homogeneity of the product: In a perfectly competitive market, all firms sell identical products. Therefore, there is no basis for price discrimination as customers have no reason to pay a higher price for the same product.
2. Perfect information: In a perfectly competitive market, buyers have perfect information about prices. If a firm tries to charge different prices to different customers, this information will quickly spread, and customers will switch to the lower-priced seller. This eliminates any benefit the firm might have gained from price discrimination.
3. No market power: Firms in a perfectly competitive market have no market power. They cannot influence the market price and must accept it as given. Therefore, they do not have the ability to set different prices for different customers.
Conclusion:
In a perfectly competitive market, firms are price takers and do not have the ability to discriminate prices. Therefore, statement c) "It is always beneficial for a firm in a perfectly competitive market to discriminate prices" is incorrect.
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Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer?
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Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer?.
Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements is incorrect?a)Even monopolistic can earn losses.b)Firms in a perfectly competitive market are price takers.c)It is always beneficial for a firm in a perfectly competitive market to discriminate prices.d)Kinked demand curve is related to an oligopolistic market.Correct answer is option 'C'. Can you explain this answer?.
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