Consider Two Oligopolistic Industries Selling the Same Product in Different

question 182

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 behavior under these very different firm behaviors.

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Definitions:

Agreed Upon Rules

Stipulations or guidelines that have been consensually accepted and followed by members of a group or society to facilitate order and predictability.

Charismatic

Pertaining to an individual's exceptional personal qualities or abilities that inspire devotion or fascination in others.

Traditional

Relating to customs, beliefs, or methods that have existed for a long time without significant change, often passed down from generation to generation.

Means-ends Rationality

A decision-making process focused on efficiently achieving a specific goal.