The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .Which of the following price and output combinations represents the overall oligopoly market equilibrium?
A)Price = $3 and output = 2.6 units
B)Price = $10.1 and output = 0.6 unit
C)Price = $7 and output = 2.6 units
D)Price = $7 and output = 1 unit

Question

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .Which of the following price and output combinations represents the overall oligopoly market equilibrium?

-Refer to Figure .Which of the following price and output combinations represents the overall oligopoly market equilibrium?
A)Price = $3 and output = 2.6 units 
B)Price = $10.1 and output = 0.6 unit 
C)Price = $7 and output = 2.6 units 
D)Price = $7 and output = 1 unit

Quizplus · Accepted Answer

In an oligopoly market with a dominant firm and a fringe, the dominant firm must consider the effect of its output decisions on the market price. The overall market equilibrium occurs at the intersection of the market demand curve and the total supply curve, which includes both the output of the dominant firm and the output of the fringe. In this diagram, the intersection of DRES and SF occurs at a price of $7 and an output of 2.6 units. This is the overall oligopoly market equilibrium. Option C is the only choice that matches this equilibrium.

The Figure Given Below Represents the Total Output and Price