Oligopolistic Agreements on Price Tend to Be Unstable Because

question 152

Multiple Choice

Oligopolistic agreements on price tend to be unstable because

• A) although the monopoly price is the best price for all firms, oligopolists are unaware of this and thus charge prices that are lower than the price that could be charged by a monopolists, therefore, decreasing social welfare.
• B) although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down.
• C) the demand for the products of oligopolistic industries is inherently unstable relative to the demand for the products of non-oligopolistic industries because demand for products in oligopolistic industries are dependent on changes in consumer tastes and preferences.
• D) firms in oligopolistic industries have more concern for consumers than do firms in competitive industries.

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