Why is market definition important for economic decision making?
A) A firm is interested in knowing its actual and potential competitors.
B) A firm will define its market in order to maximize revenue.
C) Government regulators are interested in knowing the effect of mergers and acquisitions on competition and prices in a particular market.
D) both A and C
E) both A and B

Question

Quizplus · Accepted Answer

Market definition is important for economic decision making because it helps firms understand their competition and potential market share, and it is also important for government regulators to determine the effect of mergers and acquisitions on competition and pricing in a particular market. Both choices A and C correctly highlight the importance of market definition for economic decision making. Choice B is not entirely accurate as defining the market is just one step in the process of maximizing revenue.

Why Is Market Definition Important for Economic Decision Making