question archive Which of the following is true? a) In Bertrand oligopoly, each firm believes that their rivals will hold their output constant if it changes its output
Which of the following is true? a) In Bertrand oligopoly, each firm believes that their rivals will hold their output constant if it changes its output
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Which of the following is true?
a) In Bertrand oligopoly, each firm believes that their rivals will hold their output constant if it changes its output.
b) In Cournot oligopoly, firms produce an identical product at a constant marginal cost and engage in price competition.
c) In Oligopoly, a change in marginal cost never has an effect on output or price.
d) None of the above.
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The answer is D: None of the above.
In an oligopoly market, if the marginal cost change leads to a marginal cost that is higher than the marginal revenue, the price and output of the product change. In Cournot oligopoly, each firm determines the quantity it is going to produce independently and not the price; thus, firms cannot engage in price competition. Lastly, in Bertrand oligopoly, firms independently determine prices and not the quantity.
