Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:
A) fewness of firms.
B) brand loyalty of consumers.
C) powerful effect of advertising.
D) mutual interdependence of firms.

Question

Quizplus · Accepted Answer

In an oligopoly, the actions of one firm can have a significant impact on the market and the competition. This leads to mutual interdependence, where each firm must consider the reactions of its competitors when making pricing and output decisions. This mutual interdependence complicates the pricing and output determination process, making it more challenging than in other industries. The fewness of firms, brand loyalty of consumers, and powerful effect of advertising can all impact pricing and output decisions, but they are not the primary reason for the complication.

Pricing and Output Determination Under an Oligopoly Is More Complicated