Question

in a cournot oligopoly with N-number of firms and identical marginal costs, if the number of firms decreases because firms exit, we know the markup of price over cost will

Answer 1

Answer: A) increase.

Step-by-step explanation:

Oligopolistic markets are those where the producers are very few in the market which means the market is very saturated. When one firm leaves such a market, there is less supply to feed the demand.

According to the Law of Supply, less supply comes with an increase in price because the goods in question have become more scarce. The mark-up of price over cost will therefore increase.