Figure: Demand 3 If the Two-Firm Oligopoly Facing the Market

question 24

Multiple Choice

Figure: Demand 3 If the two-firm oligopoly facing the market in this diagram is currently producing at the competitive output level and one of the firms reduces output by 4 units, the firm's profits would increase from _________________.

• A) $64 to $96
• B) $0 to $24
• C) $0 to $48
• D) $32 to $48

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Definitions:

Long-Run Equilibrium

A state in which all inputs are variable, enabling firms to make adjustments to output and prices to reach a point where no firm desires to change its production or exit the market.

Increasing Cost Industry

An industry in which production costs increase as output expands, often due to limited resources or other constraints.

Increasing-Cost Industry

An industry in which the costs of production increase as more firms enter the market, typically due to limitations in resources.

Decreasing-Cost Industry

An industry in which the average cost of production decreases as the industry grows and output increases.