The Incentive Function of Prices

question 46

Multiple Choice

The incentive function of prices

• A) indicates that price increases bring forth more of that resource.
• B) is the idea that competitive markets will always clear.
• C) applies to all resources.
• D) only applies to land.

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Definitions:

Price Leadership Model

A market situation in which one leading company sets prices that other companies in the sector follow.

Antitrust Sanctions

Penalties imposed on businesses or individuals for violating antitrust laws, intended to promote fair competition and prevent monopolistic practices.

Price Signalling

A mechanism where the price of a good or service provides information to buyers and sellers which influences their decisions.

Cartels

An association of independent firms or countries that agree to coordinate their production and pricing decisions to monopolize a market and maximize collective profits.