Question

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.

Answer 1

Answer would be C, Decrease his revenue, since his output has decreased and the price remains the same.

Tom produces commemorative t-shirts in a competitive market. If he decided to decrease his output, this will decrease his revenues since his output has decreases and the price remains the same.

When there is a decrease in the quantity of a product produced by the company, the revenues will also decrease because when more quantity is sold, more revenue is generated and vice versa, keeping the price at a constant number.

Answer 2

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.