Figure 12.5.1
-Refer to Figure 12.5.1 above. When a firm charges prices above P*, its competitors in an oligopoly market will:
A) follow suit.
B) not follow.
C) collude.
D) play tit for tat.

Question

Figure 12.5.1
-Refer to Figure 12.5.1 above. When a firm charges prices above P*, its competitors in an oligopoly market will:
A) follow suit. 
B) not follow. 
C) collude. 
D) play tit for tat.

Quizplus · Accepted Answer

If a firm charges prices above P*, its competitors in an oligopoly market will not necessarily follow suit. In fact, they may choose to keep their prices lower to attract customers away from the higher-priced firm. Alternatively, they may try to differentiate their products and/or engage in non-price competition to remain competitive.

Figure 12.5.1 -Refer to Figure 12.5.1 Above. When a Firm Charges Prices