An oligopoly with a dominant price leader will produce an output level that is ________ than the output level that would prevail if the industry were a monopoly and sells it at a price that is ________ than the price that would prevail if the industry were a monopoly.
A) higher; higher
B) higher; lower
C) lower; lower
D) lower; higher

Question

Quizplus · Accepted Answer

In an oligopoly with a dominant price leader, the output level is typically higher than in a monopoly because the dominant firm sets a price that its competitors follow, leading to more production overall. The price is lower than in a monopoly because the presence of competitors, even when following the price leader, creates pressure to keep prices more competitive than a single monopolist would.

An Oligopoly with a Dominant Price Leader Will Produce an Output