Question

Assume there are currently five firms producing and selling fertilizer in the South American market. Also assume that the product is differentiated and barriers to entry are high in the industry, making this market an oligopoly.If two firms were to exit the market, economists expect the equilibrium price will likely
a)not change
b)decrease
c) increase
and the equilibrium quantity will likely

a)not change
b)decrease
c) increase

Answer 1

Answer:

It is given that in an oligopolistic market, there are at first five firms. At the point when the quantity of fums diminishes to three, it implies that the all out yield will likewise decrease. It is on the grounds that, all the makers are delivering separated items. The inventory of merchandise won't increment in light of the fact that the makers would have expanded the creation before, if that was conceivable. Hence, the balance amount will fall and in view of decrease in amount, cost will increase.

Thus, equilibrium price will likely increase and the equilibrium quantity will likely  decrease.