The paradoxical nature of oligopoly can be demonstrated by the fact that, even though the monopoly outcome is best for the oligopolists,
A)they collude to set the output level equal to the Nash equilibrium level of output.
B)they have incentives to increase production above the monopoly outcome.
C)they do not behave as profit maximizers.
D)self-interest juxtaposes the profits earned at the Nash equilibrium.

Question

Quizplus · Accepted Answer

In an oligopoly, firms have an incentive to increase production above the monopoly outcome because this allows them to capture a larger share of the market and potentially increase their profits. However, if all firms follow this strategy, it can lead to a lower overall industry profit and be harmful to all firms in the long run. This creates a paradoxical situation where the best outcome for the oligopolists (monopoly outcome) may not be the outcome that they individually choose to pursue in their own self-interest.

The Paradoxical Nature of Oligopoly Can Be Demonstrated by the Fact