The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because
A)There are fewer firms and each is dependent on the actions of rivals.
B)Firms in an oligopoly are more profitable.
C)There are independent firms in an oligopoly.
D)Perfectly competitive firms can easily cooperate to restrict supply.

Question

Quizplus · Accepted Answer

In an oligopoly, there are fewer firms and each firm's actions depend on the actions of its rivals. This interdependence can lead to strategic behavior and the potential for collusion, which can result in firms collectively maximizing industry profits. In contrast, in perfect competition, firms are price takers and have no market power to influence prices, resulting in lower profits for all firms in the industry.

The Potential for Maximizing Total Industry Profits Is Greater in Oligopolies