Question

An industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making-price output decisions, is called a. monopolistic competitionb. oligopolyc. pure monopolyd. pure competition

Answer 1

The correct answer is option b.

Step-by-step explanation:

Oligopoly is the form of market where there are few firms which are interdependent on each other. The price and output decisions of a firm affect its competitor firms in the market who are likely to react accordingly.

That's why an oligopoly firm takes into account the reaction of its rival in making price-output decisions.