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Which one of the following statement is Incorrect?
- a)Competitive firms are price takers and not price makers
- b)Price discrimination is possible in monopoly only
- c)Duopoly may lead to monopoly
- d)Competitive firm always seeks to discriminate prices
Correct answer is option 'D'. Can you explain this answer?
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Which one of the following statement is Incorrect?a)Competitive firms ...
Incorrect Statement: Competitive firm always seeks to discriminate prices
Explanation:
Competitive firms are the ones that operate in a market where many firms are selling similar or identical products. In such a market, no single firm has control over the market price and hence, firms are price takers and not price makers. Therefore, the statement "Competitive firm always seeks to discriminate prices" is incorrect.
Price discrimination is a practice where firms charge different prices for the same product or service to different customers. Price discrimination is possible in a monopoly because the monopolist has control over the market and can charge different prices to different customers. In contrast, in a competitive market, firms cannot charge different prices because consumers have many alternatives available.
Duopoly is a market structure where two firms dominate the market. In such a market, firms may engage in strategic behavior to gain market share and profits, which may lead to a monopoly if one firm manages to drive the other out of the market.
In summary, the correct statements are:
- Competitive firms are price takers and not price makers
- Price discrimination is possible in monopoly only
- Duopoly may lead to monopoly
And the incorrect statement is:
- Competitive firm always seeks to discriminate prices
Explanation:
Competitive firms are the ones that operate in a market where many firms are selling similar or identical products. In such a market, no single firm has control over the market price and hence, firms are price takers and not price makers. Therefore, the statement "Competitive firm always seeks to discriminate prices" is incorrect.
Price discrimination is a practice where firms charge different prices for the same product or service to different customers. Price discrimination is possible in a monopoly because the monopolist has control over the market and can charge different prices to different customers. In contrast, in a competitive market, firms cannot charge different prices because consumers have many alternatives available.
Duopoly is a market structure where two firms dominate the market. In such a market, firms may engage in strategic behavior to gain market share and profits, which may lead to a monopoly if one firm manages to drive the other out of the market.
In summary, the correct statements are:
- Competitive firms are price takers and not price makers
- Price discrimination is possible in monopoly only
- Duopoly may lead to monopoly
And the incorrect statement is:
- Competitive firm always seeks to discriminate prices
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Which one of the following statement is Incorrect?a)Competitive firms are price takers and not price makersb)Price discrimination is possible in monopoly onlyc)Duopoly may lead to monopolyd)Competitive firm always seeks to discriminate pricesCorrect answer is option 'D'. Can you explain this answer?
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