Firms in oligopoly can achieve an economic profit

Question

Quizplus · Accepted Answer

Firms in oligopoly can achieve an economic profit if they cooperate with each other by forming a cartel or through strategic alliances. By cooperating, they can restrict output and increase their prices, resulting in higher profits. In the long run, competition might erode some of these profits, but in the short run, cooperative oligopolies can earn a substantial economic profit. The other options are not necessarily true. Firms in oligopoly can earn an economic profit even if the demand for their products is elastic or inelastic, depending on their market power and strategic behavior. The non-cooperative equilibrium might lead to lower profits for all firms and not necessarily an economic profit.

Firms in Oligopoly Can Achieve an Economic Profit