When a single firm in an oligopoly market decides to increase output,that firm:

Question

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When a single firm in an oligopoly market increases its output, it will face both the quantity effect and the price effect. The quantity effect implies that an increase in output will lead to a decrease in the market price, which will lower the firm's marginal revenue. The price effect implies that the firm's increase in output will raise its market share and increase the demand for its output, which will tend to raise the price. Other firms in the oligopoly market will only feel the price effect since their output levels are fixed. They will face a more elastic demand curve due to the increased competition from the firm raising its output, leading to a decrease in their market share and a lower price.

When a Single Firm in an Oligopoly Market Decides to Increase