For the non-colluding oligopolist, there are two factors that affect the decision to raise production.These factors are the:
A)output effect and the cost effect
B)cost effect and the price effect
C)production effect and the output effect
D)output effect and the price effect

Question

Quizplus · Accepted Answer

The output effect is the increase in total sales revenue due to the increase in production, while the price effect is the decrease in price due to the increase in output. So, for a non-colluding oligopolist, the decision to raise production will be based on weighing the benefits of the output effect (higher sales revenue) against the costs of the downward pressure on price due to the price effect. Therefore, the factors that affect the decision to raise production are the output effect and the price effect, which are both included in choice D.

For the Non-Colluding Oligopolist, There Are Two Factors That Affect