The Process of "Creative Destruction" in an Oligopolistic Industry Suggests

question 51

Multiple Choice

The process of "creative destruction" in an oligopolistic industry suggests that

• A) the prospect of keeping the resulting profits provides an incentive for firms to innovate.
• B) there are no costs of exit in oligopoly.
• C) profits are driven to zero by the entry of new firms.
• D) no firm can survive in the long run.
• E) firms can enter and leave without incurring any sunk costs of entry.

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Definitions:

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Tension-reduction Model

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Genetic Component

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