Tom produces commemorative t-shirts in a competitive market. if tom decides to decrease his output, this will

a. increase his revenue, since the output decrease leads to a higher market price.

b. increase his revenue, since tom's competitors will also decrease their output, so that price rises to offset the drop in tom's output.

c. decrease his revenue, since his output has decreased and the price remains the same.

d. decrease his revenue, since the price does not rise sufficiently when output drops to offset the drop in tom's output.

Question

Jarrett Carrillo

Business

4 September, 19:29

Tom produces commemorative t-shirts in a competitive market. if tom decides to decrease his output, this will

a. increase his revenue, since the output decrease leads to a higher market price.

b. increase his revenue, since tom's competitors will also decrease their output, so that price rises to offset the drop in tom's output.

c. decrease his revenue, since his output has decreased and the price remains the same.

d. decrease his revenue, since the price does not rise sufficiently when output drops to offset the drop in tom's output.

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Answers (1)

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Jamarcus Stokes · Answer 1

In a competitive market, a large number of producers compete with each other to satisfy the needs of their consumers. In here, no one or group of producers can dictate the price. They have only one major decision to make-and that is, what quantity to produce. Therefore, when Tom decided to produce commemorative t-shirts, and decrease his output, This decision did not increase his revenue, since did not lead to higher market price nor the competitors will decrease their output. The answer is C. decrease his revenue, for price remains the same.