Question

Sometimes reactions to prices in oligopolistic markets can result in a _________, which occurs when two or more firms compete primarily by lowering their prices.

Answer 1

Answer:

The correct word for the blank space is: price war.

Explanation:

An Oligopoly is when a small group of two or more companies dominates a market. Oligopoly firms may consent to market collusion, and create barriers to new commerce entry. If the businesses do not, they will probably be forced to lower their prices and open the market to new and smaller companies.

In the event one of the firms forming the oligopoly decides to lower prices, a price war occurs breaking the balance of the oligopoly and destabilizing the equilibrium of demand and supply in that market.