Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-ma

Question

antoniya [11.8K]

3 years ago

6

Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-ma

ximizing level of output. For the individual firm, this would result in:

Business

1 answer:

Mrac [35] · Answer 1 · 2022-05-19T06:06:06+03:00

Answer: Fall in revenue

Explanation:

A decrease in demand means a lower level of demand compare to the previous period. A price taking firm means that the firm cannot determine the price in the market. Profit maximising level of output means the output level that gives the highest profit.

A fall in demand without an increase in price at a profit maximising level of output will lead to a fall in revenue and profit all things being equal.