In competitive markets, businesses need to keep track of and have constant knowledge about competitor pricing in order to:

• A. increase barriers to entry for new firms
• B. adjust their own prices to remain competitive
• C. maximize government subsidies
• D. reduce the elasticity of demand for their products

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the nature of competitive markets, where many firms sell similar products and no single firm can influence the market price significantly.
2. Step 2: Recognize that in such markets, firms are price takers and must be aware of competitors' prices to avoid losing customers.
3. Step 3: Analyze why tracking competitor pricing is important: it allows firms to adjust their own prices to remain attractive to consumers and maintain market share.
4. Step 4: Consider the other options: increasing barriers to entry, maximizing government subsidies, and reducing elasticity of demand are not directly achieved by monitoring competitor prices in competitive markets.
5. Step 5: Conclude that the primary reason firms keep constant knowledge of competitor pricing is to adjust their own prices to remain competitive.