In the cigarette industry either R.J.Reynolds or Phillip Morris, for a time, raised prices twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this
A)predatory pricing.
B)a price war.
C)price leadership.
D)sales maximization.

Question

Quizplus · Accepted Answer

This is an example of price leadership. R.J. Reynolds or Phillip Morris, as the largest firms in the industry, set the price and the other firms followed suit by raising their prices by the same amount. This is a strategy commonly used by dominant firms in an industry to maintain market power and control pricing.

In the Cigarette Industry Either R