Suppose you are a small producer of corn in a perfectly competitive market and the equilibrium price is $4 per bushel. What happens if you reduce the…
Suppose you are a small producer of corn in a perfectly competitive market and the equilibrium price is $4 per bushel.
What happens if you reduce the price you charge frm $4 to $3.90 per bushel?
A) This will allow you to increase your sales, and might increase your profits.
B) No one will buy from you at that price.
C) Other producers will follow you, so the market price will fall to $3.90.
D) Your profits will go down, because you could have sold as much as you wanted at $4.
People will be happy to buy from you at $3.90, but you can sell all you want at 4.
why this question answer is D? why not A？ Please help me question it, and challenge this question. I need professional explanation to help me to challenge.
