Question

In the case of oligopolistic markets, self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.
a. True
b. False

Answer 1

Answer: True

Explanation:

An Oligopolistic market is one where the suppliers are very few in number. Cooperation is indeed difficult in such markets as they are motivated by self-interest to try to make more profits than their competitors.

This usually leads to an undesirable outcome. For instance, if two oligopolistic firms agree on a price to sell goods, one of them might decide to sell at a lower price in order to gain more market share. This will cause the other firm to reduce its prices as well which means that both companies would be worse off than when they started.