It Is Difficult to Explain How Firms Behave in an Oligopoly

question 35

Multiple Choice

It is difficult to explain how firms behave in an oligopoly because

• A)they produce differentiated products
• B)there are many suppliers and few buyers
• C)they do not attempt to maximize profits
• D)each takes into account the behavior of other firms when making pricing decisions
• E)there are no barriers to entry or exit

---

Definitions:

Monopolistically Competitive

A market structure in which many companies sell products that are similar but not identical, allowing for competition based on quality, price, and brand.

Differentiated Product

A product that is distinct from other similar products based on qualities like design, quality, or features, often achieved through branding and marketing.

Barriers

In economic terms, barriers typically refer to obstacles that impede the flow of goods, services, capital, or labor across borders, such as tariffs, quotas, or regulations.

Monopolistic Competitor

A firm that operates in a market structure characterized by many competitors selling differentiated products.