In an oligopoly market, the firms would earn the highest profit if they

Question

Quizplus · Accepted Answer

In an oligopoly market, the firms have market power to influence the market price. If each firm decides to produce the output equal to the perfectly competitive output level, the market will behave as if it is perfectly competitive, and the firms will earn normal profits. However, if they produce the output equal to the monopoly output level, they can earn higher profits as long as the market demand is not perfectly elastic. This is because the firms can charge a higher price for their product due to their market power. Therefore, in an oligopoly market, firms would earn the highest profit by producing the output equal to the monopoly output level.

In an Oligopoly Market, the Firms Would Earn the Highest