Under Which of the Following Market Conditions Is It Most

question 200

Multiple Choice

Under which of the following market conditions is it most difficult to maintain a cartel agreement?

• A) There are many firms in the industry and these firms have similar costs.
• B) There are many firms in the industry and these firms have different costs.
• C) There are few firms in the industry and these firms have similar costs.
• D) There are few firms in the industry and these firms have different costs.

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Definitions:

Cournot Duopoly

A market situation where two firms compete with one another by deciding on output quantity with the assumption that the other's decision remains constant.

Rivals

Competitors within the same market that vie for customers and market share by offering similar goods or services.

Reaction Curve

Relationship between a firm’s profit-maximizing output and the amount it thinks its competitor will produce.

Nash Equilibrium

A concept in game theory where no participant can gain by unilaterally changing their strategy if the strategies of the others remain unchanged.