As the number of firms in an oligopoly decreases:
A)barriers to entry are likely to shrink.
B)firms are less likely to engage in tacit collusion.
C)firms are more likely to engage in tacit collusion.
D)it becomes more difficult for the oligopoly to restrict output.

Question

Quizplus · Accepted Answer

With fewer firms in the market, there is a higher likelihood that the remaining firms will engage in tacit collusion. This is because it becomes easier for firms to monitor each other's actions and coordinate their behavior without explicit communication. As a result, the remaining firms may be able to maintain higher prices and restrict output more effectively, leading to a less competitive market.

As the Number of Firms in an Oligopoly Decreases