Question

An oligopoly arises when _ have all or most of the sales in an industry. If oligopolists with the same marginal costs and no fixed costs compete against each other in price, it leads to all firms _.

a) A few large firms; making a loss

b) Many small firms; making large profits

c) A few large firms; making zero profit

d) Many small firms; making zero profits

Answer 1

Answer:

The correct answer is letter "D": Many small firms; making zero profits.

Explanation:

An oligopoly is when the market is controlled by a small group of two or more firms. Businesses in an oligopoly can agree in price collusion and create barriers to entry for new commerce. When they compete against each other they act like perfect competitors which generate a price dropdown and causing zero profits for the firms.