The competitive marketing strategy involves all of the following except:

• A. Restricting entry of new firms
• B. Setting prices equal to marginal cost
• C. Responding to changes in consumer demand
• D. Maximizing profit by adjusting output

Answer: (A)

Verified step by step guidance

1. Understand the context: Competitive market strategy refers to how firms behave in a perfectly competitive market, where many firms sell identical products and no single firm can influence the market price.
2. Recall the characteristics of perfect competition: Firms are price takers, meaning they accept the market price and cannot restrict entry of new firms because there are no barriers to entry.
3. Analyze each option in relation to perfect competition: Setting prices equal to marginal cost is a key feature because firms maximize profit where price equals marginal cost.
4. Consider the firm's response to market conditions: Firms respond to changes in consumer demand by adjusting output to maximize profit, which is consistent with competitive behavior.
5. Identify the exception: Restricting entry of new firms is not part of competitive market strategy because perfect competition assumes free entry and exit, so this action contradicts the model.