"Oligopoly is the only market structure in which rivalry among firms takes place." Do you agree or disagree? Why?
What will be an ideal response?
Agree. Oligopolists recognize their strategic dependence and must take into consideration likely reactions by rivals to any decision they make. The firms realize they are in competition with other firms and may actively compete with them. Under perfect competition and monopolistic competition, there is no rivalry because the firms are too small to have any impact on the other firms. Each firm acts independent of the other firms. By definition there is no rival under monopoly. So, oligopoly is the only market structure where competitive behavior actually takes place.
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Assume that the market for consumer gasoline is perfectly competitive. When one additional seller (gas station) enters the market,
A) then at least one other seller must exit the market. B) the price of gasoline increases. C) the price of gasoline is left unaffected. D) the price of gasoline decreases. E) None of the above is correct.
If aggregate demand just increased, which of the following may have caused the increase?
A) an increase in the interest rate B) an increase in imports C) an increase in government purchases D) an increase in the price level