A. Small firms in the industry are allowed to sell all they want at that price
B. Dominant firm acts as the residual supplier of the commodity
C. The dominant firm sets the price for the commodity that maximizes its profits
D. Small firms in the industry behave as price takers
E. Dominant firm then comes into fill the market
Chose the correct answer from the option given below:
Understanding Price Leadership Sustainability Sequence
Price leadership is a model in oligopolistic markets where one firm, the dominant firm, sets the market price, and other smaller firms (price takers) follow. The sustainability of this model depends on the specific sequence of actions and behaviors.
Analyzing the Sequence
Let's break down the logical order of events in a price leadership scenario:
- C. Dominant firm sets the price: The process begins with the dominant firm deciding on a price that maximizes its own profits, anticipating the reactions of smaller firms.
- A. Small firms allowed to sell: Once the price is set by the leader, smaller firms have the opportunity to sell their entire output at this established price.
- E. Dominant firm fills the market: After considering the price (C) and the opportunity for small firms (A), the dominant firm determines its optimal production level to meet the remaining market demand.
- B. Dominant firm acts as residual supplier: This statement defines the role fulfilled by the dominant firm in step E – supplying the portion of the market demand not met by the smaller firms.
- D. Small firms behave as price takers: This confirms the fundamental behavior of the smaller firms; they accept the price set by the leader and adjust their output accordingly, rather than setting their own prices.
Therefore, the sequence reflecting the process of price leadership sustainability is C, A, E, B, D.
Important Questions from Price determination under different market forms
The demand curve that a firm faces in a perfectly competitive market is perfectly _______________ ; it is a _____________straight line at the market price.
For a monopolist, profit is maximized at that level of output where:
When the maximum price is fixed below the equilibrium price, which of the following occurs as a result?
Excess supply
Excess demand
Black marketing
A price ceiling below the equilibrium price of a commodity leads to
A. Commodity glut in market
B. Shortage of commodity
C. Demand erosion
D. Black marketing
Choose the correct answer from the options given below:
Given below are two statements, one is labelled as Assertion A and the other is labelled as Reason R
Assertion A: An oligopolist firm cannot decide the price it wishes to charge as well as the quantity it wishes to sell, both at the same time.
Reason R: An oligopolist firm takes into consideration the competitor's actions and counter actions because of a strong interdependence among the competitive firms
In light of the above statements, choose the most appropriate answer form the options given below
