In Markets Characterized by Oligopoly

question 50

Multiple Choice

In markets characterized by oligopoly,

• A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
• B) collusive agreements will always prevail.
• C) collective profits are always lower with cartel arrangements than they are without cartel arrangements.
• D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

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Definitions:

Economically Efficient

A situation where resources are allocated in a way that maximizes the production of goods and services without wasting any resources.

Zero Economic Profits

A situation where a firm's total revenues exactly equal its total costs, indicating no supernormal profit but covering all operating expenses.

Long-Run Equilibrium

A state in which a market's supply and demand balance out over time, with all firms earning normal profit and no incentive for new firms to enter or existing ones to exit.

Price Maker

A firm or entity that has the power to influence the price of goods or services in the market due to a lack of significant competition.