In a price leadership situation, where one firm sets a price for others to follow, the leading firm is the one with the
A) largest market share
B) highest quality good
C) most elastic demand curve
D) least elastic demand curve
E) most efficient production

Question

Quizplus · Accepted Answer

The leading firm in a price leadership situation is typically the one with the largest market share. This is because its size and influence in the market allow it to set prices that other, smaller firms then follow, either because they cannot compete on economies of scale or because the leading firm's actions significantly influence market conditions.

In a Price Leadership Situation, Where One Firm Sets a Price