Question

Which of the following statements is correct? Certain factors, such as quantity rather than price competition, production differentiation, search costs and discount factors O a. sufficient to sustain collusion, decrease competition and increase firms' profits. Ob The more profitable the market is for a given number of firms, the more firms will enter the market. This feedback effect will increase competition and decrease firms' profits. Greater sunk costs constrain entry even in the long-run, so firms' profits will tend to be higher in industries requiring such entry O costs. d. All of the above.

Answer 1

Ans. All of the above are correct.

As the profits in a market increases more number of firms try to enter the market and this will increase competition and decrease the firms' profits. It is true that certain factors such as quantity can decrease competition and incte==rease firms' profits. There is constraint in the entry if there are greater sunk costs.