Regarding price-level policies:
A) meeting competition is the only sensible policy in monopolistic competition.
B) in an oligopoly situation, pricing "above the market" usually leads to an increase in profit.
C) a firm in pure competition may increase profit by pricing "below the market."
D) charging a lower price than seeming competitors may not mean that a firm is selling "below the market."
E) All of the above.

Question

Quizplus · Accepted Answer

Charging a lower price than seeming competitors may not mean that a firm is selling "below the market." This is because the market price is determined by the overall supply and demand in the market, and a firm may have lower costs or a different product that allows them to price lower while still making a profit. In monopolistic competition, there may be room for some differentiation in pricing, but ultimately firms will need to compete on price to some extent. In an oligopoly situation, pricing above the market may lead to a decrease in sales and profit, as other firms may undercut them. In pure competition, firms will typically need to price at or near the market price to be competitive.

Regarding Price-Level Policies