A. They are price takers.
B. They set prices in order to minimize costs of production.
C. They set price equal to market demand.
D. They set price and quantity based on market demand.
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? Best Answer
Pricing decisions tend to be the most important decisions made by any firm in any kind of market structure. The concept of pricing has already been discussed in unit . The price is affected by the competitive structure of a market because the firm is an integral part of the market in which it operates. We have examined the two extreme markets viz. monopoly and perfect competition in the previous unit. In this unit the focus is on monopolistic competition and oligopoly, which lie in between the two extremes and are therefore more applicable to real world situations. Monopolistic competition normally exists when the market has many sellers selling differentiated products, for example, retail trade, whereas oligopoly is said to be a stable form of a market where a few sellers operate in the market and each firm has a certain amount of share of the market and the firms recognize their dependence on each other. The features of monopolistic and oligopoly arediscussed in detail in this unit.
