The Following Statements Describe a Cooperative Equilibrium in an Oligopoly

question 16

Multiple Choice

The following statements describe a cooperative equilibrium in an oligopoly where the firms are jointly maximizing profits by restricting output.Which statement is false?

• A)An individual firm could increase profits by cheating.
• B)P > MC for each individual firm.
• C)MR > MC for each individual firm.
• D)The firms in the industry will jointly be earning monopoly profits.
• E)No individual firm will have an incentive to change output.

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Definitions:

Market Price

The present rate at which a service or asset is available for purchase or sale in a specific market.

Marginal Revenue

The revenue increase resulting from the sale of one extra unit of a good or service.

Marginal Cost

Expenses accrued from the creation of one more product or service unit.

Average Total Cost

The total cost of production divided by the number of goods produced, indicating the cost on average of producing each unit of output.