To maximize profits, a firm in a highly competitive industry should set its price:
A) higher than the market price.
B) lower than the market price.
C) at the market price.
D) it depends: sometimes at the market price but sometimes higher or lower.

Question

Quizplus · Accepted Answer

In a highly competitive industry, setting the price higher than the market price will result in lower demand and loss of market share. On the other hand, setting the price lower than the market price may result in a higher demand but lower profit margin. Therefore, setting the price at the market price will maximize profits by achieving a balance between demand and profit margin.

To Maximize Profits, a Firm in a Highly Competitive Industry