Assume that the market for paper supplies and the market for toothpicks have the following char acteristics : The Market for Paper Supplies is comprised of: A large number of independent sellers Differentiated products Low barriers to entry/exit The Market for Toothpicks is comprised of: A large number of independent sellers Homogeneous products No barriers to entry/exit The Papyrus Company operates in the market for paper supplies and Wudden Floss operates in the toothpick market. The sales managers for both companies want to know how a change in price will affect the quantity sold. Which of the following choices best completes the following sentence If both firms increase prices, the quantity sold by Papyrus Company will:（）
A. increase, and the quantity sold by Wudden Floss will decrease.
B. decrease, and so will the quantity sold by Wudden Floss.
C. decrease, and Wudden Floss will sell nothing.
参考答案：C
解析：
Papyrus Company is an example of a price searcher engaged in monopolistic competition (low barriers to entry). Thus, the company faces a downward sloping demand curve and highly elastic demand. An increase in price will result in fewer units sold. Wudden Floss is an example of a price taker operating in a purely competitive market. Thus, the firm faces a horizontal demand curve and perfectly elastic demand. An increase in price will result in no units sold. In a purely competitive market, the firm must take the market price.