In the price-leadership model,

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In the price-leadership model, one dominant firm takes the reactions of all other firms into account in its output and pricing decisions. This dominant firm sets the price for the industry, and all other firms follow its lead. Therefore, the price-leadership model is a form of oligopoly, where a few large firms dominate the market. Option A is incorrect because firms in the price-leadership model do not believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their product. Option B is incorrect because firms in the model are not price takers; they have some control over pricing. Option D is incorrect because firms in the model do not coordinate as multiplant monopolies; they coordinate as oligopolies, with one dominant firm setting the price.

In the Price-Leadership Model