A perfectly competitive market is in equilibrium and 50,000 units are being produced. If four firms take over this market and a Cournot oligopoly is formed, what is the new total equilibrium quantity produced?

Question

Quizplus · Accepted Answer

In Cournot oligopoly, each firm chooses its production level based on the assumption that the other firms' production levels remain constant. The total quantity produced in a Cournot oligopoly will be less than the quantity produced in a perfectly competitive market. Therefore, the new total equilibrium quantity produced will be less than 50,000 units. Option C is the only choice that reflects this fact.

A Perfectly Competitive Market Is in Equilibrium and 50,000 Units