Which of the following is a difference between an oligopoly with homogeneous products and an oligopoly with differentiated products?
A) There are a large number of sellers in an oligopoly with homogeneous products, while there are only a few sellers in an oligopoly with differentiated products.
B) Firms in an oligopoly with homogeneous products earn positive economic profits in equilibrium, while firms in an oligopoly with differentiated products earn zero economic profits in equilibrium.
C) There are huge barriers to entry in an oligopoly with homogeneous products, while there are no barriers to entry in an oligopoly with differentiated products.
D) Firms in an oligopoly with homogeneous products earn zero economic profits in equilibrium, while firms in an oligopoly with differentiated products earn positive economic profits in equilibrium.

Question

Quizplus · Accepted Answer

In an oligopoly with homogeneous products, firms typically compete on price, leading to an equilibrium where economic profits are driven to zero due to the lack of product differentiation. In contrast, firms in an oligopoly with differentiated products can earn positive economic profits because they can distinguish their products from those of competitors, allowing them to maintain some market power and avoid price wars that erode profits.

Which of the Following Is a Difference Between an Oligopoly