In an oligopoly,when one firm reduces its prices,how do other sellers react?
A) There is no reaction from other firms to change their prices.
B) Other firms reduce their prices also, usually quite quickly.
C) Other firms may reduce their prices, but usually gradually.
D) Other firms are not usually aware that price has changed.
E) There is a combined response from other firms to stabilize prices.

Question

Quizplus · Accepted Answer

In an oligopoly, firms are interdependent and tend to closely monitor each other's actions. Therefore, if one firm reduces its prices, other sellers are likely to react by reducing their prices as well, usually quite quickly. This is because they do not want to lose market share to the price-cutting firm.

In an Oligopoly,when One Firm Reduces Its Prices,how Do Other