Asked by Zachary Wages on Jul 03, 2024
Verified
In which oligopoly model(s) do firms earn zero profit?
A) Cournot
B) Bertrand
C) Stackelberg
D) Oligopoly firms always earn positive economic profits.
Economic Profits
The financial gain achieved when revenues exceed both explicit and implicit costs.
Oligopoly Model
A market structure characterized by a few firms dominating the market, leading to strategic interactions in pricing and production.
Cournot
Refers to a model of duopoly competition in which companies choose quantity to produce independently, influencing the market price.
- Describe the conditions under which oligopoly markets reach competitive outcomes.
Verified Answer
YS
Yousef SalehJul 10, 2024
Final Answer :
B
Explanation :
In the Bertrand model, firms compete on price rather than quantity, which leads to a situation where they will undercut each other's prices until economic profits are reduced to zero. In contrast, the Cournot and Stackelberg models allow for some level of positive economic profits for firms. The provided option D is incorrect as oligopoly firms may earn zero or positive profits depending on the market conditions and factors influencing demand and supply.
Learning Objectives
- Describe the conditions under which oligopoly markets reach competitive outcomes.