In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?
A) Monopoly.
B) Oligopoly.
C) Perfect competition.
D) Cartel.

Question

Quizplus · Accepted Answer

In oligopoly, each firm's decisions regarding price and output must take into account the possible reactions of its rivals. This is because there are only a few large firms in the market, each with significant market power, and each firm's actions will have a significant impact on the market as a whole. In contrast, in perfect competition, each firm is too small to have any real impact on the market, while in a monopoly, there are no rival firms so there are no possible reactions to consider. A cartel is a group of firms that collude to act as a monopoly, so while the members of a cartel may consider each other's actions, this is not true for firms that are not part of the cartel.

In Which of the Following Market Structures Must the Price