As the number of firms in an oligopoly market:

Question

Quizplus · Accepted Answer

In an oligopoly market, there are few firms that dominate the market, resulting in limited competition. As the number of firms increases, the competition also increases, making the market more competitive. Therefore, the market approaches a competitive market equilibrium as the number of firms increases. Option A is not valid because a cartel is formed when a few large firms collude to control the market, restricting competition and fixing prices, which is not the case with an increasing number of firms. Option C is incorrect because the decrease in the number of firms increases market power, which can lead to a monopoly market. Option D is incorrect because the increase in the number of firms reduces market power, which contradicts a monopoly.

As the Number of Firms in an Oligopoly Market