If One Firm Operating in an Oligopoly Raises Its Price

question 43

Multiple Choice

If one firm operating in an oligopoly raises its price and other firms do not do so,

• A) the sales of the firm with the higher price will decline slightly.
• B) the egos of all the top executives will eventually lead to cooperation at that higher price.
• C) the sales of the firm that increased its price will decline sharply.
• D) the firm with the increased price will have its higher profits sustained through cooperation.

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Definitions:

Oligopolistic Industry

A market structure characterized by a small number of large firms dominating the industry, leading to limited competition.

Concentration Ratio

is a measure used to determine the market share of the largest firms within an industry, indicating the degree of market control and competition.

Herfindahl Index

An index reflecting the scale of companies compared to the entire sector and a sign of the level of competitive activity present.

Pure Monopolist

A market structure where a single firm is the sole producer and seller of a product or service without close substitutes, giving it significant market power.