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Decrease in input price affect supplier and consumer

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Reference no: EM132478642

Consider the following statements when answering this question

Please provide, if possible sufficient/relevant graph, with detail explanation.

I do not get how does the decrease in input price affect supplier and consumer. Assuming that we are in perfect competitive market, firm maximizes their profit where P=MC, and MC is equivalent to input cost.

Please elaborate the effect of statement 1 on producers and consumers

I. When a competitive industry's supply curve is perfectly elastic, then the sole beneficiaries of a reduction in input prices are consumers.

II. Even in competitive markets firms have no incentives to control costs, as they can always pass on cost increases to consumers.

A) I and II are true.

B) I is true, and II is false.

C) I is false, and II is true.

D) I and II are false.

Reference no: EM132478642

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