In an oligopoly, the demand curve facing an individual firm depends upon
A)the behavior of competing firms
B)the shape of the firm's average total cost curve
C)the shape of the firm's marginal cost curve
D)the firm's supply curve
E)the shape of the firm's average variable cost curve

Question

Quizplus · Accepted Answer

In an oligopoly market structure, there are only a few large firms that dominate the market. As a result, the actions of one firm can significantly impact the demand curve of another firm. Therefore, the demand curve facing an individual firm in an oligopoly depends upon the behavior of competing firms, making option A the best choice. The other options listed do not have a direct relationship with the demand curve in an oligopoly.

In an Oligopoly, the Demand Curve Facing an Individual Firm