ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price War
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Collusion
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Monopoly
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Surplus of that good
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Detailed explanation-1: -The kinked-demand curve explains why firms in an oligopoly resist changes to price. If one of them raises the price, then it will lose market share to the others. If it lowers its price, then the other firms will match the lower price, causing all the firms to earn less profit.
Detailed explanation-2: -A price war refers to the action of two rival companies who both lower the prices on products, in an attempt to undercut one another and capture greater market share.
Detailed explanation-3: -In oligopoly situation, each firm has to stick to its price. If any firm tries to reduce its price, the rival firms will retaliate by a higher reduction in their prices.
Detailed explanation-4: -Price competition in oligopolies may result in a price war where all companies lose, so the management of an oligopoly prefers to avoid competing in price. Instead, they compete in other ways such as product differentiation and improving efficiency.