Final answer:
The statement that rivalry among firms refers to actions taken to improve positions and gain an advantage over each other is True. Firms actively engage in competitive strategies to outperform rivals, which can result in increased profits or business failure. Furthermore, the competition can spur new businesses to enter the market, a process known as entry, while firms in an oligopoly might engage in collusion, which is typically illegal.
Step-by-step explanation:
True: Rivalry among firms indeed refers to all the actions taken by firms in the industry to improve their positions and gain an advantage over each other. In highly competitive markets, firms constantly seek to innovate, improve efficiency, reduce costs, and enhance their product offerings to outperform competitors. Actions such as price cutting, marketing campaigns, and product development are all part of the ongoing competition.
Competition may lead to reduced profits for some businesses, which can ultimately result in a business being driven out of the industry if it cannot keep up. This process can also affect workers, leading to loss of income or jobs. Additionally, in a scenario known as entry, profitable firms can attract new competitors into the market, which further intensifies the competition.
Conversely, firms in an oligopoly might be tempted to engage in collusion to set prices and control the market, acting more like a monopoly and lessening the competitive dynamics. However, such collusive behavior is typically against antitrust laws and is not a legitimate or sustainable business strategy.