Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?
A) Less foreign competition has stimulated more price competition in oligopolies.
B) Oligopolies are less technologically competitive, so they lose market share.
C) Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry.
D) The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry.

Question

Quizplus · Accepted Answer

Oligopolies may purposely keep prices below short-run profit-maximizing levels to increase market share and deter potential competitors from entering the market, which leads to less allocative efficiency. Additionally, oligopolies may not invest in new technologies or production methods to maintain their market power, leading to less productive efficiency. Choice A is incorrect because less foreign competition does not necessarily lead to more price competition. Choice B is also incorrect because oligopolies can still maintain market power even if they are not technologically competitive. Choice D is incorrect because collusive practices can lead to higher prices and less competition, further reducing allocative and productive efficiency.

Which Would Be a Qualification to the View That Oligopoly