In an oligopolistic market,
A) The less elastic the demand, the greater the markup
B) The larger the number of firms, the greater the markup
C) The fewer the number of firms, the greater the markup
D) A and C

Question

Quizplus · Accepted Answer

In an oligopolistic market, firms have some degree of market power, which means they can set prices higher than the marginal cost of production. The greater the market power, the greater the markup. One factor that affects market power is the number of firms in the market. The fewer the firms, the greater the market power and the markup. Additionally, the elasticity of demand also affects market power. The less elastic the demand, the greater the markup. Therefore, options A and C are both correct.

In an Oligopolistic Market