Does an oligopoly produce the efficient quantity of output or does it create a deadweight loss? Do the firms want to produce the efficient quantity of output? Explain your answer
What will be an ideal response?
An oligopoly might or might not produce the efficient quantity of output. It produces the efficient quantity if the firms cheat on any agreement to collude by increasing their output so that it winds up the same as the perfectly competitive amount. In this case, price equals marginal cost and the outcome is efficient. There is no deadweight loss. From the firms' perspectives, this outcome is undesirable because the firms make zero economic profit, that is, only a normal profit.
If the firms can play repeated games, detecting and punishing overproduction, the oligopoly is more likely to restrict output to the monopoly level. This outcome is inefficient because marginal cost does not equal marginal benefit. A deadweight loss is created. From the firms' perspective, this outcome is more desirable because the firms make an economic profit.
The firms' goal is to maximize their economic profit. Because their profit is higher if they successfully collude and limit their production, the firms do not want to produce the efficient quantity of output.
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It has been found that
A. less-developed countries have more equality of income distribution. B. more-developed countries have more equality of income distribution. C. only prior communist countries have more equality of income distribution. D. income distribution cannot be measured among countries with different political and economic systems.
Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max receives a $100 cash grant to buy either meat or chicken?
A) Max will double his consumption of both meats. B) Max will spend it all on burger. Because of its lower price, he can buy more of it. C) Max will take advantage of the gift by buying all chicken because it is the more expensive meat. D) There is not enough information to answer the question.
The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product of labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is
A) less than $10. B) $10. C) $20. D) less than $200. E) $200
Table 14.3Table 14.3 represents 3 markets for used stereos. Which of the markets in Table 14.3 are not in equilibrium?
A. 1 only B. 2 only C. 3 only D. 1, 2, and 3