Under Oligopoly, a Few Large Firms Control Most of the Production

question 21

Multiple Choice

Under oligopoly, a few large firms control most of the production and sale of a product because:

• A)economies of scale make it difficult for small firms to compete.
• B)diseconomies of scale make it difficult for small firms to compete.
• C)zero economic profits are earned by firms in the long run.
• D)marginal costs increase as production expands
• E)the average total cost curve is inverted U-shaped.

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Definitions:

Utility Function

A concept in economics that defines how individuals or entities decide among various alternatives based on the perceived happiness or satisfaction each option will provide.

Income

The amount of money received on a regular basis from work, property, business, investment, or welfare payments.

Price

The amount of money required to purchase a good or service, determined by various factors including supply, demand, cost of production, and market conditions.

Utility Function

A representation in economic theory of how a consumer ranks different bundles of goods based on the level of satisfaction (utility) they provide.