Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
True
B
False
Understanding the Answer
Let's break down why this is correct
Answer
In an oligopoly, a few companies dominate the market, and if one of them is making a positive economic profit, it means they are earning more than just covering their costs. This profit attracts new competitors because they want to take advantage of the opportunity to earn money too. However, unlike in perfect competition, new firms may not enter the market immediately due to high barriers like expensive equipment or strong brand loyalty. Over time, if the profit continues, some firms may find a way to enter, which can increase competition. Eventually, this competition can drive profits down to zero, as companies will lower their prices to attract customers.
Detailed Explanation
In an oligopoly, firms can earn profits for a while. Other options are incorrect because This answer suggests that profits will always attract new firms right away.
Key Concepts
Economic Profit
Oligopoly Market Structure
Market Dynamics
Topic
Economic Profit and Oligopoly
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.