The theory of oligopoly provides another reason that free-trade can benefit all countries for which of the following reasons?
(i) as the number of firms within a given market increases, the price of the good falls
(ii) increased competition leads to lower deadweight losses
(iii) profit increases directly with competition for oligopoly firms
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(ii) only

Question

Quizplus · Accepted Answer

The theory of oligopoly suggests that increased competition, such as that from free trade, can lead to benefits such as lower prices (i) due to more firms in the market and reduced deadweight losses (ii) because competition tends to make markets more efficient. Profit does not necessarily increase directly with competition for oligopoly firms (iii), making options involving (iii) incorrect.

The Theory of Oligopoly Provides Another Reason That Free-Trade Can