The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because

Question

Quizplus · Accepted Answer

In an oligopoly, there are fewer firms and each firm's actions affect the market price and the profits of its rivals, creating interdependence. This encourages firms to consider the reactions of their competitors when making decisions, leading to potential collusion or agreements to maximize industry profits. In contrast, in perfect competition, there are many firms that do not have significant market power, and there is no interdependence among them. As a result, there is little potential for maximizing industry profits in perfect competition. Therefore, option A is the correct answer.

The Potential for Maximizing Total Industry Profits Is Greater in Oligopolies