Which of the following statements is correct?
A)When duopoly firms reach a Nash equilibrium, their combined level of output is the monopoly level of output.
B)When oligopoly firms collude, they are behaving as a cartel.
C)In an oligopoly, self-interest drives the market to the competitive outcome.
D)An oligopoly is an example of monopolistic competition.

Question

Quizplus · Accepted Answer

When oligopoly firms collude, they agree to act like a cartel and set prices and output levels to maximize their joint profits. A is incorrect because duopoly firms may not necessarily produce the monopoly level of output at the Nash equilibrium. C is incorrect because self-interest can lead to cooperation, collusion or competition in an oligopoly. D is incorrect because oligopoly and monopolistic competition are different market structures.

Which of the Following Statements Is Correct