In an oligopoly, each firm knows that its profits a. depend only on how much output it produces. b. depend only on how much output its rival firms produce. c. depend on both how much output it produces and how much output its rival firms produce. d. will be zero in the long run because of free entry.

Question

Business

Kamila Woodward

23 November, 08:24

In an oligopoly, each firm knows that its profits a. depend only on how much output it produces. b. depend only on how much output its rival firms produce. c. depend on both how much output it produces and how much output its rival firms produce. d. will be zero in the long run because of free entry.

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Damon Norman · Answer 1

Depend on both how much output it produces, and how much output its rival firm produces

Explanation:

Oligopoly is a from of market dominated by a group of different sellers. This makes it difficult for a particular seller or manufacturer to take advantage of market situation due to its interdependence nature, hence competition is at minimal and consumers suffer high prices.

A firm operating in this type of market needs to also give consideration to the volume the output produced by its rivals as well as its own in setting prices and determining profit.