The textile industry in a foreign country is controlled by four major companies. Last week, one of the companies decided to cut prices as a way to expand inventory. Since this industry is an oligopoly, what will be the likely response of the other three companies?
A) They will increase production levels.
B) They will make similar price cuts.
C) They will raise prices.
D) They will seek additional market share.
E) They will not respond to the price cuts.

Question

Quizplus · Accepted Answer

In an oligopoly, companies are interdependent, and a price cut by one company often leads others to follow suit to maintain their market share.

The Textile Industry in a Foreign Country Is Controlled by Four