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:

Defame

To damage someone's reputation through false or unjustified statements.

Preexisting Obligation

An obligation that already exists before a certain action is taken or an agreement is made, often relevant in contract law.

Under Seal

denotes a formal legal process or document that has been officially sealed, indicating confidentiality or authenticity.

Substituting a New Contract

Replacing an existing contract with a new one, which extinguishes the obligations under the original contract.