Question

In an oligopoly, the total output produced in the market is

a. lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive.

b. higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive.

c. higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.

d. lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive.

Answer 1

The total output produced in an oligopolistic market is higher than that in a monopoly but lower than in perfect competition, due to the competitive behavior among oligopolists.

Step-by-step explanation:

In an oligopoly, firms can be tempted to act competitively to increase their profit, potentially leading to a market output similar to that of perfect competition.

This scenario presents a strategic dilemma, known as the Prisoner's Dilemma, where oligopolists face a temptation to increase production and lower prices, rather than acting collectively as a monopoly would.

Hence, the total output produced in an oligopolistic market is higher than that of a monopoly because of increased competition among firms, but it is lower than that of a perfectly competitive market because they do not produce where price equals marginal cost.

The correct answer to the question is c: higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.

Answer 2

Letter c is correct. Higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.

Step-by-step explanation:

An oligopoly is a market situation that occurs when there are a small number of companies that dominate the supply of a particular product or service in a sector of the economy. It can occur naturally or structurally, and the purpose of this market configuration is to have greater competition and price control, so that there is greater profitability.

This scenario is characterized by imperfect competition, which is similar to the monopoly market, but in oligopoly production is higher than in monopoly, because there is more than one supplier of the same product. And production in an oligopoly is lower than in a perfectly competitive scenario where there are many suppliers and none have the ability to affect market price.