Question

1) Price searchers can set the prices of their products.

True or False: The ability to set price means that price searchers will always charge the highest possible price for their products.

A) True

B) False

2) True or False: Although price searchers can set their prices, the prices they can set are still affected by market conditions.

A) True

B) False

Suppose firms in a competitive price-searcher market with low barriers to entry are earning an economic profit.

Firms will   this market until economic profits are .

Answer 1

1) False

The ability to set the price means that price searcher will always charge the highest possible price of their product.

It is not true because price searchers have to cut their price to sell additional output, due to competition. Price searchers will charge the highest possible price to the consumers those who have inelastic demand but not from all consumers.

2) True

Although price searchers can set their prices, the prices they can set are still affected by market conditions it is so because the barrier on entry and exit is low in the competitive price searcher markets. So they can set the prices but effected by the market competition.