In the dominant firm model, the fringe firms:
A) are price takers.
B) maximize profit by equating average revenue and average cost.
C) determine their price and output before the dominant firm determines its price and output.
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

In the dominant firm model, the fringe firms are typically small and lack market power, so they must accept the price set by the dominant firm and are therefore price takers. The other options are not applicable to the behavior of fringe firms in this model.

In the Dominant Firm Model, the Fringe Firms