Question

Suppose that the vast majority of 3/4 ton pick-up trucks in America are produced by companies A, B, C, and D and that they all sell for a similar price. If company A suddenly decides to reduce price substantially, what should company A expect? a. A revolt from Company A’s stockholders. b. A very large increase in sales. A very rapid and similar response by the other large firms in the industry. c. A "cease and desist" order from the Anti-trust Division of the Federal Justice Department. d. An announcement by the other major firms that they have no plans to match this price cut.

Answer 1

Answer:

b. A very large increase in sales. A very rapid and similar response by the other large firms in the industry.

Explanation:

As for the information there is no clear agreement to sell the goods at the same price, like that of other industries.

Further since all the companies follow the same price, there is no such differentiation.

In case one of the companies, in our case company A if decreases the price then it will abruptly that is in no clear sequence will increase its sales, and the after effects will also include the decrease in prices by other remaining industries that is B, C and D.