Which of the following is a market leader strategy in competitive markets?

• A. Setting the market price for all firms
• B. Colluding with competitors to fix output
• C. Product differentiation to maintain dominance
• D. Restricting entry by imposing high barriers

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a market leader strategy. A market leader is a firm that has the largest market share in an industry and often influences the market conditions, including prices, output, and product features.
2. Step 2: Analyze each option in the context of competitive markets. Competitive markets typically have many firms, free entry and exit, and no single firm can set prices unilaterally.
3. Step 3: Evaluate 'Setting the market price for all firms' — in competitive markets, firms are price takers, so no single firm can set the market price. This is more typical of a monopoly or an oligopoly.
4. Step 4: Consider 'Colluding with competitors to fix output' — collusion is illegal in many countries and is not a sustainable or ethical market leader strategy in competitive markets.
5. Step 5: Recognize that 'Product differentiation to maintain dominance' is a valid market leader strategy because it allows a firm to distinguish its products from competitors, thereby maintaining or increasing market share without relying on price-setting or collusion.