Dominant price leadership exists when
A)one firm drives the others out of the market.
B)the dominant firm decides how much each of its competitors can sell.
C)the dominant firm establishes the price at the quantity where its MR = MC,and permits all other firms to sell all they want to sell at that price.
D)the dominant firm charges the lowest price in the industry.

Question

Quizplus · Accepted Answer

Dominant price leadership occurs when a single firm, the dominant firm, establishes the price at the quantity where its marginal revenue (MR) equals marginal cost (MC). Other firms in the market are then free to sell as much as they want to sell at that price. The dominant firm does not actively control the behavior of its competitors but sets the standard for pricing in the industry. This allows the dominant firm to maintain its market dominance and protect its profits without violating antitrust laws. Therefore, option C is the best choice.

Dominant Price Leadership Exists When