In oligopoly situations:
A) prices tend to be rigid and similar--because of price-fixing agreements.
B) price wars may occur if a firm seeks to increase its market share by cutting price.
C) a firm faces an INELASTIC demand curve if it raises price.
D) the quantity offered changes a lot due to the lack of a fixed market price.
E) All of the above are true.

Question

Quizplus · Accepted Answer

In oligopoly situations, firms are interdependent and may engage in price wars to increase their market share. However, prices may still be relatively rigid due to the influence of other firms in the market. The demand curve may be more elastic than in a monopoly, but it is still likely to be relatively inelastic. The quantity offered may also change, but not as much as in a perfectly competitive market. So while some of the statements in the other answer choices are true in certain situations, option B is the best choice for a generally accurate statement about oligopoly situations.

In Oligopoly Situations