An oligopoly with a dominant price leader will produce a level of output
A) equal to what a monopolist would choose in the same industry.
B) between that which would prevail under competition and that which a monopolist would choose in the same industry.
C) between that which would prevail under competition and that which a monopolistic competitor would choose in the same industry.
D) that would prevail under competition.

Question

Quizplus · Accepted Answer

In an oligopoly with a dominant price leader, the level of output is typically between what would be produced in a perfectly competitive market and what a monopolist would produce. The dominant firm sets a price that maximizes its own profits, considering the reactions of the other firms in the industry, leading to an output level that is less than in a competitive market but more than what a monopolist would produce.

An Oligopoly with a Dominant Price Leader Will Produce a Level