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 Value

The cost at which an asset or service can be sold or bought right now in the marketplace.

Excess Cash

Cash that exceeds the normal operating needs of a business and is available for investing or returning to shareholders.

Stock Repurchase

A corporate action in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.