How do economies of scale contribute to the development of an oligopoly?
A) Economies of scale make it legally difficult for new firms to enter.
B) Economies of scale make small-scale producers inefficient.
C) Economies of scale are based on control of a key resource, without which other firms cannot enter an industry.
D) Economies of scale are guaranteed when a patent is granted.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a company experiences as it increases its production output. Oligopolies are industries dominated by a small number of firms. When economies of scale are present, larger firms can produce goods or services at a lower cost per unit than smaller firms. This makes it difficult for new firms to enter the market and compete. As a result, existing firms can maintain their market share and consolidate their position, leading to the development of an oligopoly. Thus, economies of scale contribute to the development of an oligopoly by making small-scale producers inefficient.

How Do Economies of Scale Contribute to the Development of an Oligopoly