Question

Erin Reinhardt and her friend Carol Newman have just arrived in the country Bologna for a summer holiday.

While renting a car on their first day in Bologna they notice that the car rental rates are so much higher than rates back home.
Carol says that in a matter of​ time, competition should drive prices down. Erin feels that the market for car rentals is probably competitive​ enough; it could just be the high cost of operations in Boloni that are responsible for the high prices.

Which of the​ following, if​ true, would weaken​ Erin's argument that high costs are responsible for high​ prices?

a. The car rental industry in Boloni is valued at​ $50 million.
b. Most households in Boloni own at least one car.
c. After global oil prices​ increased, the government of Boloni decided to ration the quantity of gasoline sold.
d. Only 3 firms account for almost 88 percent of the car rental market.
e. Most of the growth in the car rental industry comes from the​ high-value rentals of luxury cars.

Answer 1

D) Only 3 firms account for almost 88 percent of the car rental market.

Step-by-step explanation:

Erin says that rental rates are high because the cost of running car rental companies is very high in Boloni, but if 88% of the market is controlled by only 3 companies, then the lack of competition is responsible for the high prices. The car rental market in Boloni is an oligopoly since the 3 big firms control the prices and probably keep them artificially high due to their market power.