Pricing and Output Determination Under an Oligopoly Is More Complicated

question 20

Multiple Choice

Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries.The primary reason for the complication is the:

• A)small number of firms.
• B)brand loyalty of consumers.
• C)powerful effect of advertising.
• D)variability of concentration ratios.
• E)mutual interdependence of firms.

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Definitions:

DFL

Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.

ROCE

Return on Capital Employed; a financial ratio that measures a company's profitability and the efficiency with which its capital is used.

Financing Charges

Interest and other costs associated with borrowing funds or purchasing goods and services on credit.

ROE

Return on Equity; a financial ratio that measures the profitability of a company in relation to the amount of equity, indicating how effectively shareholder equity is being utilized to generate profits.