When firms are interdependent,
A)One firm can ignore other companies in the market when making decisions.
B)The profit of one firm depends on how its rivals respond to its strategic decisions.
C)They can act independently of one another.
D)Then the market is perfectly competitive.

Question

Quizplus · Accepted Answer

When firms are interdependent, the profit of one firm depends on how its rivals respond to its strategic decisions. This means that each firm's actions will have an impact on the other firms in the market, making them interdependent. Therefore, option B is the correct choice. Option A is incorrect because no firm can ignore other companies in the market when making decisions if the firms are interdependent. Option C is also incorrect because interdependent firms cannot act independently of one another. Finally, option D is not necessarily true as interdependence does not imply a perfectly competitive market.

When Firms Are Interdependent