If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in _______ market and have _______ with the other firms in the market.
A) an oligopoly or monopolistically competitive; interdependence
B) a monopolistically competitive; no interdependence
C) an oligopoly; no interdependence
D) an oligopoly; interdependence

Question

Quizplus · Accepted Answer

In an oligopoly market, a few firms dominate and have significant control over the market price and output. These firms are interdependent because the actions of one firm can significantly impact the profits and strategies of the other firms in the industry. This interdependence is a key characteristic of oligopolies, where firms must consider the potential reactions of their competitors when making decisions.

If Firms in an Industry Make Output Decisions That Are