According to "Coke and Pepsi May Call Off Pricing Battle," price discounting (price wars) can destroy oligopoly profits.When profit destruction occurs,
A) Firms are powerless to change prices.
B) Firms will wait for one firm to increase prices.
C) Rival oligopolists seek to end it as quickly as possible.
D) The entire industry will always collapse.

Question

Quizplus · Accepted Answer

When profit destruction occurs in an oligopoly, rival firms seek to end it as quickly as possible because price wars can lead to reduced profits for all firms involved. Therefore, the best choice is C. A is incorrect because firms always have the power to change prices, although they may choose not to in order to maintain market share. B is also incorrect because waiting for one firm to increase prices may not necessarily end the price war. Lastly, D is incorrect because the collapse of an entire industry is an extreme outcome that may not necessarily occur due to price wars.