Which of the following is true of a firm in an oligopoly market?
A)Each firm faces a downward-sloping demand curve with a kink at the current price.
B)Firms in oligopoly markets are very small relative to the market.
C)Products in oligopoly markets could either be differentiated or homogeneous.
D)The profit-maximizing output is determined by equating price and marginal cost.

Question

Quizplus · Accepted Answer

Products in oligopoly markets could either be differentiated or homogeneous. This is a defining feature of oligopoly markets, where a few firms dominate the market and can produce either differentiated products (like smartphones) or homogenous products (like gasoline). The other options are not true of oligopoly markets. The demand curve for each firm in an oligopoly is not a simple downward slope but can have kinks, discontinuities or other irregularities depending on the behavior of other firms in the market, which makes it difficult for firms to predict how their rivals will respond to changes in price or output. Firms in oligopoly markets are usually very large and influential, with significant market power and the ability to affect prices and output. Also, the profit-maximizing output is not necessarily determined by equating price and marginal cost, as firms in oligopoly markets may have other goals like sales maximization, market share, or strategic behavior.

Which of the Following Is True of a Firm in an Oligopoly