Author Question: Under conditions of oligopoly markets, firms generally don't like to compete based on price. Why? ... (Read 83 times)

justinmsk · **on:** Jun 30, 2018

Under conditions of oligopoly markets, firms generally don't like to compete based on price. Why?
a. Because no producer has a cost advantage in doing so.
b. Because consumers rarely spend time making price comparisons between different brands.
c. Because competing on the basis of price can set off a price war among competitors and significantly reduce profits to the firm.
d. Because price competition is illegal in most states.

Question 2

Explain the concept of liquidated damages with an example.

rekilledagain · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

c

Answer to Question 2

The legal remedy for a breach is often liquidated damages. Assume that Jones breaches a contract with Smith that would have created substantial economic value had they both performed as agreed upon. If a court determines that there was a breach, their contract may specify that Jones pay Smith a particular form of them called expectation damages. These are an amount that leaves Smith as well off as if Jones had not breached. Smith will be paid the amount she expected to gain at the time they made the contract, net of any amount she actually did receive after the breach.