Which of the following, if true, would be the best example of the Bertrand model of oligopoly?
A) The automobile market where the market price is set by the price leader
B) The electricity market where there are significant barriers to entry
C) The cigarette market where there are a small number of large firms
D) The breakfast cereal market where the product is highly differentiated
E) A competitive auction where the good that is auctioned goes to the lowest bidder

Question

Quizplus · Accepted Answer

The Bertrand model of oligopoly describes a market situation where firms compete on price, and the firm offering the lowest price captures the entire market. Choice E, a competitive auction where the good goes to the lowest bidder, best exemplifies this model as it directly involves competition on price, with the lowest price winning.

Which of the Following, If True, Would Be the Best