Multiple Choice
In a perfectly competitive market, a firm's marginal cost (MC) is given by MC = 10 + 2q, where q is the quantity produced. If the market price is 20, what is the profit-maximizing quantity for the firm?
3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following could be considered an example of a competitive advantage in a competitive market?
A
A firm sets prices above the market equilibrium.
B
A firm ignores consumer preferences when designing its products.
C
A firm has lower production costs than its rivals due to advanced technology.
D
A firm faces higher input costs than its competitors.
Verified step by step guidance1
Understand the concept of competitive advantage: it refers to a firm's ability to produce goods or services at a lower cost or with better quality than its competitors, allowing it to achieve superior performance in the market.
Analyze each option in the context of competitive advantage:
- Setting prices above the market equilibrium is generally not sustainable in a competitive market because consumers will buy from competitors offering lower prices.
- Ignoring consumer preferences typically leads to lower demand, which is not an advantage.
- Having lower production costs due to advanced technology means the firm can produce more efficiently, which is a clear competitive advantage.
- Facing higher input costs than competitors is a disadvantage, not an advantage.
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