An important defence of oligopoly as a market structure is that
A)it involves less allocative inefficiency than monopoly.
B)it results in lower prices than perfect competition.
C)it is the most efficient available alternative when the minimum efficient scale is large.
D)it generates less unused capacity than monopolistic competition.
E)it is more productively efficient than monopoly.

Question

Quizplus · Accepted Answer

Oligopoly is a market structure that involves a limited number of large firms dominating the industry. When the minimum efficient scale is large, oligopoly becomes the most efficient structure available due to economies of scale. The firms can exploit economies of scale to achieve lower costs per unit, which ultimately results in lower prices for consumers. In contrast, monopolistic competition would result in higher costs due to the fragmentation of producers, while a monopoly would lead to a lack of competition and higher prices. Therefore, choice C is the best answer.

An Important Defence of Oligopoly as a Market Structure Is