In an oligopoly, the total output produced in the market is
A)higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive.
B)higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.
C)lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive.
D)lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive.

Question

Quizplus · Accepted Answer

In an oligopoly, the market is dominated by a few large producers. While they have some control over the price, they also have to consider the reactions of their rivals. This leads to a situation where firms are not producing at the minimum point of their average total cost curve as they do not want to provoke retaliation by their rivals. As a results, the total output produced in the market is lower than what would be produced if the market were perfectly competitive. However, it is higher than what a single monopoly producer would produce as the monopoly producer would restrict output to increase prices and profits. Hence, option B is the correct answer.

In an Oligopoly, the Total Output Produced in the Market