Which of the following is true?
A) In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output.
B) In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition.
C) In oligopoly a change in marginal cost never has an effect on output or price.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

Option A is incorrect because in Bertrand oligopoly, each firm believes that its rivals will increase their output if it lowers its price, leading to a "price war" and lower profits for all firms.
Option B is incorrect because in Cournot oligopoly, firms produce an identical product, but they make decisions based on their rivals' expected output levels and not on price competition. 
Option C is incorrect because changes in marginal cost can affect output and price in oligopolies, depending on the specific market characteristics and firms' behavior.

Which of the Following Is True