The figure above shows the market demand curve for a market with three firms. It also shows a firm's marginal cost curve. In this oligopoly, what is the range of output and prices? Why does this range of outcomes exist?
What will be an ideal response?
If the firms operate as a monopoly, they produce a total of 200 units per day and set a price of $12 per unit. If the firms compete and operate as perfect competitors, they produce 400 units per day and the price is $4 per unit. The range of possible outcomes exists because firms in oligopoly have the choice of colluding to decrease output to monopoly levels or cheating on the cartel and increase output to its efficient level. A range of prices also exists between the monopoly price and the perfectly competitive price.
You might also like to view...
The best example of a good sold in a monopolistically competitive market is
A) pizza. B) the local newspaper. C) sewer services. D) peaches.
College education tends to result in a negative externality because the recipient does not receive the full benefit of the education
Indicate whether the statement is true or false
According to the theory of structural patterns of development, which of the following tends to occur as a country develops?
a. a shift from agriculture to industry and services b. an increase in the percentage of income spent on food c. growth of the rural sector d. a decline in trade as a share of GNP
Mutual recognition of standards refers to
A) the elimination of tariffs and quotas by trading partners. B) common product safety, environment, labor, and fair competition standards agreed upon by trading partners. C) the acceptance of a trading partner's standards as valid and sufficient by another trading partner. D) separate standards held by different trading partners which other partners refuse to recognize.