In a competitive market, a price-setter company will use more:

• A. market power to influence prices
• B. price-taking behavior to maximize profit
• C. perfect information to set prices
• D. competitive equilibrium to determine output

Answer: (A)

Verified step by step guidance

1. Understand the difference between a price-setter and a price-taker in microeconomics. A price-setter is a firm that has some control over the price of its product, while a price-taker must accept the market price as given.
2. Recall that in a perfectly competitive market, firms are price-takers, meaning they cannot influence the market price and must accept it to maximize profit.
3. Recognize that a price-setter firm has market power, which means it can influence the price of its product by adjusting the quantity it supplies.
4. Note that perfect information and competitive equilibrium are concepts that describe market conditions but do not directly describe the behavior of a price-setter firm in setting prices.
5. Conclude that a price-setter company will use its market power to influence prices, distinguishing it from price-taking behavior.