Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit. If the government forces the oligopolists to stop colluding, the price charged by the oligopolies will ________ and the total output produced will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

When firms in an oligopoly stop colluding, they tend to compete more aggressively, which typically leads to a decrease in prices and an increase in total output as each firm tries to capture a larger share of the market.

Assume That Firms in an Oligopoly Are Currently Colluding to Set