Question

As the number of firms in an oligopoly increases, the magnitude of the a. price effect increases. b. output effect decreases. c. price effect decreases. d. output effect increases.

Answer 1

Answer:

c

Explanation:

The correct answer to the question is c

As the number of firms in an oligopoly increases, the magnitude of  the output effect increases as the quantity of output becomes closer to socially efficient quantity. Entry barrier decreases and the firm thus increase their production and decrease their average cost per unit production. The whole scenario changes to perfect competition from oligopoly.