Question

In an oligopoly, each firm knows that its profits a. depend only on how much output it produces. b. depend only on how much output its rival firms produce. c. depend on both how much output it produces and how much output its rival firms produce. d. will be zero in the long run because of free entry.

Answer 1

c. depend on both how much output it produces and how much output its rival firms produce.

Explaination:

Oligopoly is a small number of interdependent large firms that dominate the market. It has significant barriers to entry (e.g. trade secrets, high start-up costs, and heavy advertising to create brand image).

In oligopoly, there is a non-price competition, also, products may be differentiated (e.g. cars, aircrafts, etc.). Firms make economic profits. They are Interdependent (not independent; the actions of one firm will affect the other, which is why sometimes they make agreements in secret). Here,Prices are sticky (do not change a lot).

Answer 2

Depend on both how much output it produces , and how much output its rival firm produces

Step-by-step explanation:

Oligopoly is a from of market dominated by a group of different sellers.This makes it difficult for a particular seller or manufacturer to take advantage of market situation due to its interdependence nature , hence competition is at minimal and consumers suffer high prices.

A firm operating in this type of market needs to also give consideration to the volume the output produced by its rivals as well as its own in setting prices and determining profit.