In which of the following scenarios will automobile prices be the lowest?
A) A monopoly automobile company buys its steel from a monopoly steel producer.
B) A monopoly automobile company buys its steel from a competitive steel producer.
C) A competitive automobile company buys its steel from a competitive steel producer.
D) A competitive automobile company buys its steel from a monopoly steel producer.

Question

Quizplus · Accepted Answer

In a scenario where there is competition in both the automobile and steel industries, prices are likely to be the lowest as both companies will have to be efficient and offer competitive prices in order to attract customers. In monopolies, prices are typically higher as there is no competition to drive prices down. Therefore, choice C where both industries are competitive is the best option for lower automobile prices.

In Which of the Following Scenarios Will Automobile Prices Be