23. Regarding price-level policies:
a) charging a lower price than competitors may
not mean that a firm is selling «below the market».
Yes, this is the
correct answer, but it isn't an easy one. If you're not sure you understand,
go back to Chapter 17 on pricing.
b) meeting competition is the only sensible policy in
monopolistic competition.
Of course not, the
«beauty» of monopolistic competition is that the firm is operating
in some kind of a monopoly situation, implying that a higher price can
be charged.
c) a firm in pure competition may increase profit by
pricing «below the market».
No, whatever happens,
if you're in a pure competition, pricing below the market will necessarily
mean that profits will decrease, even if demand is highly elastic, since
presumably the equilibrium price is where profits are maximal.
d) in an oligopoly situation, pricing «above the
market» usually leads to an increase in profits.
Again no, for similar
reasons as above, the market price, or equilibrium price, is where profits
are maximized. So, whether you price above or below the market, profits
will decrease.
e) all of the above are true.
Obviously not.