Consider Two Oligopolistic Industries Selling the Same Product in Different

question 141

Multiple Choice

Consider two oligopolistic industries selling the same product in different locations.In the first industry, firms always match price changes by any other firm in the industry.In the second industry, firms always ignore price changes by any other firm.Which of the following statements is true about these two industries, holding everything else constant?

• A)Market prices are likely to be higher in the first industry, in which firms always match price changes by rival firms, than in the second, where firms ignore their rivals' price changes.
• B)Market prices are likely to be lower in the first industry, where firms always match price changes by rival firms, than in the second, where firms ignore their rivals' price changes.
• C)Market prices are likely to be the same in both markets because they are both oligopolistic markets.
• D)No conclusions can be drawn about the pricing behaviour under these very different firm behaviours.

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Definitions:

Grounding Prong

The metal prong on a plug designed to connect the electrical device safely to the ground, reducing the risk of electric shock.

Resistance

A measure of the opposition to the flow of electric current, expressed in ohms (Ω).

Electromotive Force

A difference in potential that drives electric current from one point to another, measured in volts.

Voltage

The electrical potential difference between two points in a circuit, driving the flow of current.