Question

34. Which of the following statements is correct? a. If oligopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly. b. Although the logic of self-interest decreases a oligpoly’s price below the monopoly price, it does not push the duopolists to reach the competitive price. c. Although the logic of self-interest increases a oligopoly’s level of output above the monopoly level, it does not push the oligopolists to reach the competitive level. d. All of the above are correct.

Answer 1

Answer:

The correct answer is option d.

Explanation:

If oligopolists are able to collude successfully, they will be able to fix price and output similar to a monopoly.

In order to maximize profits, the oligopoly firms keep their prices higher than a perfectly competitive firm but lower than monopoly. The output level is kept higher than a monopoly firm but lower than a perfectly competitive firm.