Which of the following is true?
A) In Bertrand oligopoly markets, each firm believes that its rivals will hold their output constant if it changes its output.
B) In Cournot oligopoly markets, firms produce an identical product at a constant marginal cost and engage in price competition.
C) In Sweezy oligopoly markets, each firm believes rivals will cut their prices in response to a price reduction, but will not raise prices in response to price increases.
D) In oligopoly markets, a change in marginal cost never has an effect on output or price.

Question

Quizplus · Accepted Answer

Sweezy oligopoly markets are characterized by firms believing that their rivals will cut prices in response to a price decrease but will not raise prices in response to a price increase. This leads to a kinked demand curve, where a firm is hesitant to change its price due to the uncertainty of how rivals will react. In Bertrand oligopoly markets, firms compete on price, and in Cournot oligopoly markets, firms compete on quantity. Option D is false as a change in marginal cost can have an effect on output and price in oligopoly markets.

Which of the Following Is True