For a time, either R. J. Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Economists call this

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Business

Joselyn Glover

6 April, 02:37

For a time, either R. J. Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Economists call this

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Edward Sullivan · Answer 1

The options for this question are the following:

A. predatory pricing.

B. a price war.

C. price leadership.

D. producer sovereignty.

The correct answer is C. price leadership.

Explanation:

A company has price leadership when establishing the price of the products of its industry and other companies, often much lower than the leader, always with adjustments. This generally happens when the products do not present large differences nor is there sufficient demand for each of the competitors to remain profitable after the price change. Economists have identified three types of price leadership.