Question

Which of the following correctly explains the dominant firm model of an oligopoly?

Group of answer choices
A. The firm that sets the lowest price gains the entire market share.
B. A single firm sets a price which is lower than the current market price and gains market share at the expense of the other firms.
C. A single firm sets the price in the market, which is taken as given by the other smaller firms.
D. Each firm in the market sets its price based on the reaction of the other firm.
E. The firms in the market collude and set prices in order to maximize their combined profits.

Answer 1

C. A single firm sets the price in the market, which is taken as given by the other smaller firms

Step-by-step explanation:

An oligopoly is when there are a few large firms operating in an industry. There are significant barriers to entry or exit of firms in the industry.

An oligopoly can set price through price leadership. It is when a firm sets the price in the market, which is taken as given by the other smaller firms.

Another way an oligopoly sets prices is through collusion. It is when firms in an oligopoly come together to set prices.

I hope my answer helps you.