As the Number of Firms in the Oligopoly Grows Very

question 25

Multiple Choice

As the number of firms in the oligopoly grows very large, the

• A)output effect disappears.
• B)price effect disappears.
• C)output effect equals the price effect.
• D)price of the product greatly exceeds marginal cost.

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Definitions:

Marginal Propensity

The rate at which an individual, household, or economy is likely to consume (or save) with respect to an incremental increase in income.

Multiplier

An economic factor that quantifies the impact of increased spending in the economy, leading to a proportional increase in income and consumption.

Marginal Propensity

The proportion of an additional unit of income that is spent on consumption; a key concept in Keynesian economics related to how income changes affect spending.

Simple Multiplier

The Simple Multiplier is an economic concept that quantifies the impact of a change in investment, government spending, or other economic activity on total output or income.