As the number of firms in a Cournot industry increases:
A)the level of output falls.
B)the price of output approaches the competitive level.
C)the firms' incentive to collude increases.
D)the price of output gets higher.

Question

Quizplus · Accepted Answer

As the number of firms in a Cournot industry increases, the market becomes more competitive and firms' market power decreases. This results in the price of output approaching the competitive level. Therefore, option B is the correct answer. Option A is incorrect because the level of output may increase or decrease depending on the specific market conditions. Option C is incorrect because as the market becomes more competitive, firms have less of an incentive to collude. Option D is incorrect because the price of output generally decreases as the market becomes more competitive.

As the Number of Firms in a Cournot Industry Increases