Suppose that an industry is characterized by a few firms and price leadership. We would expect that

A) price would equal marginal cost.
B) price would equal average total cost.
C) price would exceed both marginal cost and average total cost.
D) marginal revenue would exceed marginal cost.

Question

Chris Wallace · Accepted Answer

Final Answer : C, Explanation :  In an industry characterized by a few firms and price leadership, firms often have some degree of market power, allowing them to set prices above their marginal cost and average total cost to maximize profits. This scenario typically does not result in price equaling marginal cost or average total cost, nor does it usually result in marginal revenue exceeding marginal cost, as firms aim to maximize profits by setting prices strategically.

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

A) price would equal marginal cost.
B) price would equal average total cost.
C) price would exceed both marginal cost and average total cost.
D) marginal revenue would exceed marginal cost.

Definitions

Learning Objectives

Learning Objectives

Related questions

Suppose that an industry is characterized by a few firms and price leadership. We would expect thatA) price would equal marginal cost.B) price would equal average total cost.C) price would exceed both marginal cost and average total cost.D) marginal revenue would exceed marginal cost.

Definitions

Learning Objectives

Learning Objectives

Related questions

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

A) price would equal marginal cost.
B) price would equal average total cost.
C) price would exceed both marginal cost and average total cost.
D) marginal revenue would exceed marginal cost.