If a Market Is a Duopoly and Additional Firms Enter

question 297

Multiple Choice

If a market is a duopoly and additional firms enter and do not cooperate, then

• A)price and quantity fall.
• B)price and quantity rise.
• C)price falls and quantity rises.
• D)price rises and quantity falls.

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Definitions:

Market Risk

The risk of losses in investments due to factors that affect the entire market or asset class, such as economic changes or political events.

Firm-specific Risk

The type of risk that affects a particular company or industry, also known as unsystematic risk.

Diversified Away

The risk that can be reduced or eliminated in a portfolio through investments in a variety of assets, thus not tied to the performance of a single investment.

Market Risk

The risk of losses in positions arising from movements in market prices.