When prices in oligopoly markets exceed those in a perfectly competitive equilibrium, this difference is the cost of:
A)information.
B)inefficiency.
C)market power.
D)product differentiation.

Question

Quizplus · Accepted Answer

Prices in oligopoly markets are typically higher than those in perfectly competitive markets due to the market power held by a small number of firms. This allows them to influence prices and limit competition, resulting in higher prices for consumers. The difference between prices in an oligopoly market and a perfectly competitive equilibrium is due to the presence of market power. In oligopoly markets, a few firms dominate the market and have the ability to manipulate prices to their advantage. This results in higher prices for consumers, which is the cost of market power. Information, inefficiency, and product differentiation can also play a role in oligopoly markets, but they are not the primary drivers of price differences.

When Prices in Oligopoly Markets Exceed Those in a Perfectly