A firm in an oligopoly knows that its _____ affect its _____ and that the reactions of its rivals will affect it.
A)actions; rivals
B)price changes; total revenue in the short run
C)actions rarely; rivals
D)price increases; total revenue in the long run only

Question

Quizplus · Accepted Answer

In an oligopoly, firms are interdependent and their actions can affect their rivals as well as themselves. Therefore, a firm needs to consider how its actions will affect its rivals and how their reactions will affect the firm. This makes choice A the best answer. Option B is incorrect because price changes affect total revenue in both the short and long run. Option C is incorrect because firms in oligopoly are interdependent and their actions rarely affect their rivals is an inaccurate statement. Option D is incorrect because price increases will affect the firm's total revenue in both the short and long run.

A Firm in an Oligopoly Knows That Its _____ Affect