Final answer:
True, A plus-one market-based pricing strategy is not effective in perfectly competitive markets because firms are price takers and must accept the market's equilibrium price.
Step-by-step explanation:
A plus-one market-based pricing strategy does not simply mean setting a price 1% higher than competitors' prices. In economics, particularly in discussions about perfectly competitive markets, such pricing strategies are often ineffective. As noted in Chapter 8, in a perfectly competitive market, a firm is considered a price taker, which means it must accept the market's equilibrium price.
In such markets, if a firm attempts to raise its price even slightly above that of competitors, it risks losing all its sales because customers can easily switch to other sellers offering the same product. This is because all products in a perfectly competitive market are considered homogeneous, having no significant differences, thereby making price a key factor in consumer decision-making.
In the context of independent truckers, we can apply the same idea. Independent truckers are numerous and small enough that they possess most of the characteristics of a perfectly competitive market, meaning they must also accept the going rate for their services.
Therefore, it is false to assert that a business, especially in a perfectly competitive market, should employ a plus-one market-based pricing strategy by setting prices 1% higher than competitors. Doing so would lead to a loss of sales, as consumers would switch to the competitors for a better price.