Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The market price will decrease sharply.
B
The market price will stabilize at a higher level.
C
The market price will fluctuate widely.
D
The market price will become unpredictable.
Understanding the Answer
Let's break down why this is correct
Answer
In an oligopolistic market, a few firms dominate and can influence prices. When firms collude, they work together to set prices higher than they would be in a competitive market. If one firm adopts price leadership, it sets a price that other firms follow, which can help maintain the higher price level. As a result, the overall market price is likely to rise because the firms are coordinating their actions instead of competing against each other. For example, if a leading firm raises its price for a popular product, other firms may follow suit, leading to higher prices for consumers across the market.
Detailed Explanation
When firms in an oligopoly work together, they can set higher prices. Other options are incorrect because Some might think that prices will drop sharply; People might believe prices will change a lot.
Key Concepts
Collusion
Price Leadership
Topic
Economic Profit and Oligopoly
Difficulty
medium level question
Cognitive Level
understand
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