If one firm operating in an oligopoly raises its price and other firms do not do so,
A) the sales of the firm with the higher price will decline slightly.
B) the egos of all the top executives will eventually lead to cooperation at that higher price.
C) the sales of the firm that increased its price will decline sharply.
D) the firm with the increased price will have its higher profits sustained through cooperation.

Question

Quizplus · Accepted Answer

In an oligopoly, firms are highly interdependent. If one firm raises its price while others do not, consumers will switch to the cheaper alternatives offered by competitors, leading to a sharp decline in the sales of the firm that increased its price.

If One Firm Operating in an Oligopoly Raises Its Price