Question

True or False: If Hubert's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $80,000 would result in the same change in the production quantity and, thus, total revenue.

Answer 1

Answer:

False

Explanation:

In a perfectly competitive market the sales revenue is based on pricing also. As the pricing policy also plays an important role in the marketing technique to attract customers.

As the quality served is generally the same in the market, there is no issue in that but when the price is reduced expected sales will increase and accordingly the expected revenue also increases.

As the sales is expected to increase the revenue will also increase accordingly, even though the price is reduced, due to increase in sales quantity the expected change shall not be same as that of the change in price.

Thus, the statement is False.