Question

Consider an oligopoly industry whose firms have identical demand and cost conditions. If the firms decide to collude, then they will want to collectively produce the amount of output that would be produced by:______
a. A monopolistic competitor.
b. A pure competitor.
c. A pure monopolist.
d. None of the above.

Answer 1

Answer:

The correct answer is C. A pure monopolist.

Explanation:

The pure monopoly arises when there is a total absence of competition, due to independent entry barriers to the company's competitive capacity.

A single company offers a product that has homogeneous characteristics, which has no substitutes and for that reason has a large number of buyers. There are also economic, technological or legal barriers that prevent the entry of potential competitors. That is, there are barriers to entry.