Which of the following pairs are characteristics of price-setters?

Question

BlackTom AI · Accepted Answer

Question restatement: The prompt asks which pair describes characteristics of price-setters, meaning firms that have some market power to set prices rather than just take them as given.
Option 1: Less competition and target costing. This pairing is problematic because while price-setters may enjoy less competition, target costing is a cost-management approach used to design products with a target selling price in mind, not a defining feature of price-setters themselves. The combination here misattributes target costing as a characteristic of price setters.
Option 2: Lack of product uniqueness and heavy competition. This option describes a market with little differentiation and strong competitive pressure, which tends to align with price-takers rather than price-setters. Price-setters typically arise when differentiation or market power exists, not when competition is intense.
Option 3: Cost-plus pricing and less competition. This pairing fits well with price-setter behavior. Cost-plus pricing uses a markup on costs to determine price, a straightforward method that can be employed when a firm exerts some pricing power, and less competition supports the ability to set prices rather than simply accepting market prices.
Option 4: Less competition and lack of product uniqueness. While less competition helps price-setters, the lack of product uniqueness suggests commoditized goods, which usually reduces pricing power. Therefore, this combination is not a reliable hallmark of price-setters.
Summary: Each option is evaluated for how well it aligns with the concept of price-setters—firms that can influence prices due to market power or product differentiation. The most consistent pairing with price-setting capability is option 3, incorporating both pricing method (cost-plus) and reduced competitive pressure, whereas the other options mix elements that do not reliably indicate price-setting power.

Which of the following pairs are characteristics of price-setters?Single choice

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