Why is it bad if firms set prices below the market price? Multiple Choice a) it
ID: 1224212 • Letter: W
Question
Why is it bad if firms set prices below the market price?
Multiple Choice
a) it is not bad, they sell all of their product.
b) Because their expenses are higher than needed.
c) Because they could sell more items at higher prices, maximizing profit
d) Because they will not be able to operate in the long run.
a) it is not bad, they sell all of their product.
b) Because their expenses are higher than needed.
c) Because they could sell more items at higher prices, maximizing profit
d) Because they will not be able to operate in the long run.
Explanation / Answer
d) Because they will not be able to operate in the long run.
When price is less than market price, firm might sell all the products. His revenue will be large but profit will not be so much. So, he will not be able to operate in the long run.
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