What is the dilemma faced by firms in oligopoly?
What will be an ideal response?
Because there are just a few large firms in an oligopoly, output and pricing decisions made by one firm affect the demand for other firms' goods. To maximize the total joint profit, the firms must cooperate, act like a monopoly so as to restrict output and earn monopoly profits. But each firm has an incentive to cheat on an agreement to restrict output because if it increases production it can (temporarily, at least) earn higher profits. But if all firms increase production, total profits will fall and the market will move toward the competitive equilibrium.
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In a perfectly competitive market, all firms in the long run earn:
A) positive economic profit. B) positive accounting profit. C) zero economic profit. D) zero accounting profit.
Refer to the scenario above. In equilibrium, ________
A) Mathew will choose good and Peter will choose bad B) Peter will choose good and Mathew will choose bad C) both Mathew and Peter will choose bad D) both Mathew and Peter will choose good
Assuming the market of soda has a regular downward sloping demand curve and upward sloping supply curve, the tax will ________ the price paid by buyers and ________ the price received by sellers
A) decrease; increase B) decrease; decrease C) increase; increase D) increase; decrease
All industrialized countries have become "service economies" in recent decades. Explain the reasons behind this shift