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When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is
- a)more than the price charged by either monopoly or a competitive market
- b)less than the price charged by either monopoly or a competitive market
- c)more than the price charged by a monopoly and less than the price charged by a competitive market
- d)less then the price charged by a monopoly and more than the price charged by a competitive market.
Correct answer is option 'D'. Can you explain this answer?
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When an oligopolist individually chooses its level of production to ma...
Explanation:
Oligopoly is a market structure in which a few large firms dominate the market. An oligopolist has the power to influence the market price by changing its level of production. However, it must consider the reactions of its competitors to any price or output changes.
When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is less than the price charged by a monopoly and more than the price charged by a competitive market. This is because:
Less than the price charged by a monopoly: A monopoly is a market structure in which there is only one seller in the market. The monopolist has the power to set the price and quantity of the product. The monopolist charges a price that is higher than the marginal cost of production, which results in a deadweight loss to the society. An oligopolist charges a lower price than a monopolist because it faces competition from other firms in the market.
More than the price charged by a competitive market: In a competitive market, there are many small firms that produce identical products. Each firm is a price taker and has no power to influence the market price. The market price is determined by the intersection of the market demand and supply curves. In a competitive market, the price is equal to the marginal cost of production. An oligopolist charges a higher price than a competitive market because it has some market power to influence the market price.
Therefore, the correct answer is option 'D': less than the price charged by a monopoly and more than the price charged by a competitive market.
Oligopoly is a market structure in which a few large firms dominate the market. An oligopolist has the power to influence the market price by changing its level of production. However, it must consider the reactions of its competitors to any price or output changes.
When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is less than the price charged by a monopoly and more than the price charged by a competitive market. This is because:
Less than the price charged by a monopoly: A monopoly is a market structure in which there is only one seller in the market. The monopolist has the power to set the price and quantity of the product. The monopolist charges a price that is higher than the marginal cost of production, which results in a deadweight loss to the society. An oligopolist charges a lower price than a monopolist because it faces competition from other firms in the market.
More than the price charged by a competitive market: In a competitive market, there are many small firms that produce identical products. Each firm is a price taker and has no power to influence the market price. The market price is determined by the intersection of the market demand and supply curves. In a competitive market, the price is equal to the marginal cost of production. An oligopolist charges a higher price than a competitive market because it has some market power to influence the market price.
Therefore, the correct answer is option 'D': less than the price charged by a monopoly and more than the price charged by a competitive market.
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When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that isa)more than the price charged by either monopoly or a competitive marketb)less than the price charged by either monopoly or a competitive marketc)more than the price charged by a monopoly and less than the price charged by a competitive marketd)less then the price charged by a monopoly and more than the price charged by a competitive market.Correct answer is option 'D'. Can you explain this answer?
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