Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:
A) fewness of firms.
B) brand loyalty of consumers.
C) powerful effect of advertising.
D) variability of concentration ratios.
E) mutual interdependence of firms.

Question

Quizplus · Accepted Answer

In an oligopoly, there are only a few firms, and each firm's decision regarding pricing and output affects not only its own profits but also the profits of its competitors. This mutual interdependence creates a complex situation where firms must anticipate and react to the actions of their competitors, leading to strategic behavior and potentially collusive practices.

Pricing and Output Determination Under an Oligopoly Is More Complicated