Multiple Choice
When oligopolistic firms change their pricing strategies, which of the following actions do they typically take?
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14. Oligopoly
Characteristics of Oligopoly
Multiple Choice
Which of the following is a possible effect of government intervention in oligopolistic markets?
A
It eliminates barriers to entry for all new firms.
B
It always leads to higher prices for consumers.
C
It guarantees collusion among firms.
D
It can increase competition by enforcing antitrust laws.
Verified step by step guidance1
Understand the nature of oligopolistic markets, where a few firms dominate and may have incentives to collude or restrict competition.
Recognize that government intervention can take various forms, such as enforcing antitrust laws, regulating prices, or reducing barriers to entry.
Analyze the possible effects of government intervention: it may increase competition by preventing collusion and promoting entry, but it does not always guarantee collusion or always lead to higher prices.
Evaluate each option by considering economic theory: eliminating all barriers is unlikely, guaranteed collusion contradicts the purpose of antitrust laws, and higher prices are not a necessary outcome.
Conclude that the most plausible effect is that government intervention can increase competition by enforcing antitrust laws, which aim to prevent anti-competitive behavior.
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