An oligopolist will increase production if the output effect is
A)less than the price effect.
B)equal to the price effect.
C)greater than the price effect.
D)The oligopolist never has an incentive to increase production.

Question

Quizplus · Accepted Answer

The output effect occurs when the additional revenue gained from selling more units is greater than the loss incurred from the lower price needed to sell those additional units. If the output effect is greater than the price effect, it means the revenue from selling more units outweighs the loss from the lower price, incentivizing the oligopolist to increase production.

An Oligopolist Will Increase Production If the Output Effect Is