In an oligopoly market, firms always:

Question

Quizplus · Accepted Answer

In an oligopoly market, firms make decisions in light of expected reactions from other firms. This is because there are only a few dominant firms in the market and their actions can have a significant impact on the overall market outcome. Firms must consider the potential reactions of their competitors before making strategic decisions such as pricing, advertising, and product development. Therefore, option B is the correct answer. Options A, C, and D are incorrect as they do not accurately portray the behavior of firms in an oligopoly market. In an oligopoly market, firms are interdependent and have a significant impact on each other's decisions. Therefore, they make decisions in light of expected reactions from other firms, including pricing strategies, advertising, and production levels. This behavior is known as strategic interdependence, and it is a defining characteristic of oligopolies. Offering products that are not perfect substitutes and setting price equal to marginal cost are not typical behaviors of oligopolistic firms. Similarly, being price takers would suggest the market is perfectly competitive, which is not the case in an oligopoly.

In an Oligopoly Market, Firms Always