question archive Assume that there is an oligopoly consisting of firms of different sizes
Assume that there is an oligopoly consisting of firms of different sizes
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Assume that there is an oligopoly consisting of firms of different sizes. If a small firm increases output by 25 percent, the price effect realized by the small firm will be _____. If a large firm increases output by 25 percent, the price effect realized by the large firm will be _____.
a. nonexistent; negligible,
b. negligible; nonexistent,
c. nonexistent; substantial,
d. substantial; nonexistent,
e. negligible; substantial.
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Assume that there is an oligopoly consisting of firms of different sizes. If a small firm increases output by 25 percent, the price effect realized by the small firm will be nonexistent. If a large firm increases output by 25 percent, the price effect realized by the large firm will be negligible
Option a. nonexistent; negligible is correct.
This is a correct option because there is price rigidity in the oligopoly market. There will not be any impact if there is change in the price level as the change in prices by the one firm changes the market share of that firm.
