True or False: If Clancy's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in the same change in the production quantity and, thus, total revenue.

Question

Business

Alvin Hahn

30 January, 07:30

True or False: If Clancy's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in the same change in the production quantity and, thus, total revenue.

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Answers (1)

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Nikolas Best · Answer 1

False

Explanation:

The reason is that the decrease in the asset value doesn't results in equal decrease in the production quantity because these two variable are unrelated and thus have very lower degree of correlation. This means that increase or decrease in market price of the engine will not affect the production quantity by the same amount and thus the statement is incorrect.