Answer :
Final answer:
Competitive pricing is a strategy where businesses base their prices on what competitors are charging for similar products and services. They first decide the quantity and then set the price, often in line with production costs and desired profits.
Explanation:
The pricing strategy in which prices are guided by the price other businesses set for similar products and services is known as
competitive pricing
. In this strategy, businesses decide their own pricing based on what their competitors are charging. For example, if a firm operating in a monopolistic competition, it chooses its profit-maximizing quantity and price similar to how a monopoly makes these decisions. First,
the firm selects the profit-maximizing quantity
to produce. Then the firm decides what price to charge for that quantity. Here, the price they set for a product is usually equal to its production cost and desired profit rate, as reflected in Figure 3.12 Setting Prices.
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