When a firm sets its price on the basis of the price being charged by other firms in the market,there is evidence that the firm has market power.

Question

Quizplus · Accepted Answer

When a firm sets its price solely based on what other firms are charging, this indicates that the firm does not have market power and is a price-taker rather than a price-setter. A firm with market power would have the ability to set its own price, regardless of what other firms are charging.

When a Firm Sets Its Price on the Basis of the Price