"In a competitive market, prices are dictated heavily be the inherent underlying cost." "This is false. The relationship between cost and price is weak." Actu

"In a competitive market, prices are dictated heavily be the inherent underlying cost." "This is false. The relationship between cost and price is weak." Actually, this is true and is a well-documented and understood microeconomic concept. The more competitive a market (i.e. more firms, lower barriers to entry etc.) the more cost will dictate price. In this particular example, the market is not perfectly competitive, but the firms competing, (Verizon, Etc.) are not making significant profit margins. This is a pretty good explanation, but a little searching will provide other wording which can help better understand the concept. http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/perfectly-competitive-markets.asp#axzz27Pj8Za00 http://www.investopedia.com/exam-guide/cfa-level-1/microecon...