Multiple Choice
In the framework of an oligopoly, which strategy can function as a silent form of cooperation among firms?
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14. Oligopoly
Characteristics of Oligopoly
Multiple Choice
In markets characterized by oligopoly, the equilibrium quantity is typically:
A
less than in monopoly
B
greater than in monopoly but less than in perfect competition
C
greater than in both monopoly and perfect competition
D
equal to the equilibrium quantity in perfect competition
Verified step by step guidance1
Step 1: Understand the market structures involved: monopoly, oligopoly, and perfect competition. Monopoly has a single seller, perfect competition has many sellers, and oligopoly has a few sellers.
Step 2: Recall that in a monopoly, the single firm restricts output to maximize profit, resulting in a lower equilibrium quantity compared to more competitive markets.
Step 3: In perfect competition, many firms produce where price equals marginal cost, leading to the highest equilibrium quantity among the three market structures.
Step 4: Oligopoly lies between monopoly and perfect competition in terms of competition intensity. Firms in an oligopoly compete but also have some market power, so the equilibrium quantity is higher than monopoly but lower than perfect competition.
Step 5: Therefore, the equilibrium quantity in an oligopoly is typically greater than in monopoly but less than in perfect competition.
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