The theory of oligopoly provides another reason that free trade can benefit all countries because
A)increased competition leads to larger deadweight losses.
B)As the number of firms within a given market increases,the price of the good decreases.
C)As the number of firms within a given market increases,the profit of each firm increases.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

According to the theory of oligopoly, as the number of firms within a given market increases, the price of the good decreases. This can lead to benefits for all countries involved in free trade as increased competition can result in lower prices for consumers and increased efficiency for firms. Option A is incorrect because increased competition generally leads to smaller deadweight losses as firms are forced to produce at a lower cost. Option C is also incorrect because in an oligopoly, the profit of each firm decreases as competition increases. Option D is incorrect because only option B is a correct statement.

The Theory of Oligopoly Provides Another Reason That Free Trade