Author Question: What is the potential drawback if firms follow a price leadership model in an actual market? A) ... (Read 59 times)

ts19998 · **on:** Jul 1, 2018

What is the potential drawback if firms follow a price leadership model in an actual market?

A) The price leader's behavior may be interpretted as collusion and be subject to antitrust sanctions.
B) Excessive price signalling may force all of the firms to adopt price-taking strategies, which reduces overall profits among the firms.
C) Disputes about which firm should be the price leader may lead to price wars.
D) Signalling efforts increase the firms' fixed costs of production.

Question 2

When we solve the firm's dual production problem (i.e., maximize output subject to a cost constraint) by the method of Lagrange multipliers, the optimal value of the Lagrange multiplier equals the:

A) marginal product per unit cost of each variable input.
B) marginal product of capital.
C) marginal product of labor.
D) marginal cost of production.