Price competition within an oligopoly of firms with identical products drives profits to:
A) about 15% return on equity
B) zero
C) about 5 percent return on equity
D) about 10% return on equity

Question

Quizplus · Accepted Answer

In an oligopoly with identical products, intense price competition can drive profits to zero because firms will continue to undercut each other's prices in order to gain or maintain market share, eventually eroding all profit margins.

Price Competition Within an Oligopoly of Firms with Identical Products