When oligopoly firms engage in cut-throat competition it tends to result in ________. more profits fewer...

When oligopoly firms engage in cut-throat competition it tends to result in ________.

more profits
fewer profits
zero economic profits

Expert Solution

When oligopoly firms engage in cut-throat competition it tends to result in Zero Economic profit.

Reason : Oligopoly is basically a market structure where there are few firms producing or selling homogeneous or identical product and the firms are mutually interdependence.
The firms in the oligopolistic market maintain the price of the product by cooperation and collusion.
Any change in any variable by a firm is likely to have an equal reaction on the part of other competing firms.

If an oligopoly firms engage in cut throat competition then it may create a condition of perfect competition which leads to Zero Economic Profit.
Therefore, oligopolistic should maintain the price of product by means of cooperation and collusion , and should not enter into cut throat competition.

Rahul Sunny answered 2 years ago

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