Which of the following statements about oligopoly situations is TRUE?
A) "Price cutters" face fairly elastic demand curves.
B) Cutting prices can lead to everyone losing sales revenue.
C) Many large sellers are competing with each other.
D) Essentially heterogeneous products are offered by many competitors.
E) None of the above is true.

Question

Quizplus · Accepted Answer

In an oligopoly situation, cutting prices can lead to a price war with all competitors cutting prices and losing sales revenue. This is known as the "prisoner's dilemma" where each competitor is better off not cutting prices, but if one does, the others are forced to follow suit in order to maintain market share. This leads to a situation where everyone loses out on revenue.

Which of the Following Statements About Oligopoly Situations Is TRUE