Oligopolists will earn zero profits unless they can collude

Marketing Jan 12, 2021

Oligopolists will earn zero profits unless they can collude. True or False?

Expert Solution

This statement is true.

The amount of profits that firms earn in oligopolies depends on how much the firms compete with each other. If the firms are constantly competing with each other based on price, they will be acting as firms in perfect competition do and will continue to lower their prices until economic profits fall to zero. If, however, the firms collude with each other, they will be acting as a monopoly, which will allow them to maximize their collective profits.

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