Oligopolies are difficult to analyze because A. how firms respond to a price change by a rival is uncertain. B. the firms are so large. C. oligopolies are a recent development so economists have not had time to develop models. D. demand and cost curves do not exist for these types of industries.

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13 April, 12:06

Oligopolies are difficult to analyze because A. how firms respond to a price change by a rival is uncertain. B. the firms are so large. C. oligopolies are a recent development so economists have not had time to develop models. D. demand and cost curves do not exist for these types of industries.

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Scooby · Answer 1

Oligopolies are difficult to analyze because the firms are so large.

Explanation:

Oligopolies are difficult to analyze NOT because, how firms respond to a price change by a rival is uncertain. it is now globally understood that if a player in the industry increases its price, it will loose customers because other players will not increase their own price; and if contrariwise a player reduces its price, it will loose profits as others will respond by a corresponding price cut.

The reason why they are difficult to understand is that the firms are so large. These large firms have a lot of room to determine their level of output and how much price they will charge the customer for it. This ability of output and price fixing complicates the understanding and analysis of oligopoly firms. A good example is OPEC who decides the quantity of oil to be produced by each member state and fixes the price per barrel of oil.