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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Verified Answer
Price taker firms _________a)Do not advertise their product because it...
What is a 'Price-Taker' ... All economic participants are considered to be price-takers in a market of perfect competition, or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market.
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Price taker firms _________a)Do not advertise their product because it...
Price taker firms do not have the power to influence the market price of their product. Hence, they have to accept the prevailing market price and sell their products accordingly. They cannot charge a higher price as it would result in a decrease in demand for their product. Similarly, charging a lower price would not result in an increase in their revenue as they would be selling their products at a loss. Therefore, price taker firms have to sell their products at the prevailing market price.
Explanation:
Price taker firms are those firms that have no control over the market price of their product. They are small players in the market and their individual actions do not have any significant impact on the market price. Price taker firms have to accept the market price and sell their products accordingly. There are several reasons why price taker firms do not advertise their products:
1. No need to advertise: Price taker firms do not have to advertise their products as they can sell as much as they wish at the prevailing market price. This is because the demand for their product is determined by the market and not by their advertising efforts.
2. Advertising is costly: Advertising is a costly affair and price taker firms cannot afford to spend a significant amount of money on advertising. This is because they operate on a narrow profit margin and any additional expense would reduce their profitability.
3. No competitive advantage: Price taker firms do not have a competitive advantage over their competitors. Hence, advertising would not result in an increase in their market share or sales.
4. No misleading the customers: Price taker firms do not advertise their products as it may mislead the customers. This is because they cannot offer their products at a lower price than the prevailing market price.
Conclusion:
In conclusion, price taker firms do not advertise their products as they have no control over the market price of their product. They can sell their products at the prevailing market price and do not need to advertise to boost demand. Advertising is costly, and price taker firms cannot afford to spend a significant amount of money on advertising. Hence, price taker firms do not advertise their products.
Explanation:
Price taker firms are those firms that have no control over the market price of their product. They are small players in the market and their individual actions do not have any significant impact on the market price. Price taker firms have to accept the market price and sell their products accordingly. There are several reasons why price taker firms do not advertise their products:
1. No need to advertise: Price taker firms do not have to advertise their products as they can sell as much as they wish at the prevailing market price. This is because the demand for their product is determined by the market and not by their advertising efforts.
2. Advertising is costly: Advertising is a costly affair and price taker firms cannot afford to spend a significant amount of money on advertising. This is because they operate on a narrow profit margin and any additional expense would reduce their profitability.
3. No competitive advantage: Price taker firms do not have a competitive advantage over their competitors. Hence, advertising would not result in an increase in their market share or sales.
4. No misleading the customers: Price taker firms do not advertise their products as it may mislead the customers. This is because they cannot offer their products at a lower price than the prevailing market price.
Conclusion:
In conclusion, price taker firms do not advertise their products as they have no control over the market price of their product. They can sell their products at the prevailing market price and do not need to advertise to boost demand. Advertising is costly, and price taker firms cannot afford to spend a significant amount of money on advertising. Hence, price taker firms do not advertise their products.
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Price taker firms _________a)Do not advertise their product because it...
How can a price taker sell as much as he want?
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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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