An Oligopolist Will Increase Production If the Output Effect Is

question 10

Multiple Choice

An oligopolist will increase production if the output effect is

• A)less than the price effect.
• B)equal to the price effect.
• C)greater than the price effect.
• D)The oligopolist never has an incentive to increase production.

---

Definitions:

Perfectly Elastic

Describes a situation in which the quantity demanded or supplied changes by an infinite amount in response to any price change, depicted as a horizontal line on a graph.

Long-run Equilibrium

A state in which all factors of production are variable, leading to a situation where firms only earn normal profits and no incentives exist for entering or exiting the industry.

Short-run Equilibrium

The condition in which the quantity supplied equals the quantity demanded at a particular price level, but only over a short period.

Purely Competitive Firm

A company operating in a market where there are many buyers and sellers, with none being able to influence the market price significantly.