Which of the following is correct about the discount effect facing companies in perfectly and imperfectly competitive markets? Companies in perfect competition _____ it. Companies in imperfect competition _____ it.
A)face; face
B)face; do not face
C)do not face; face
D)do not face; do not face

Question

Quizplus · Accepted Answer

In perfect competition, prices are determined by the market and companies are price takers, meaning they cannot set prices above the equilibrium without losing all their customers. Therefore, they do not face a discount effect. In imperfect competition, companies have some power to set prices and can face a discount effect because they can influence their prices and sales through discounts and promotions.

Which of the Following Is Correct About the Discount Effect