To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to cooperate rather than compete with each other.

Question

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Encouraging firms in an oligopoly to cooperate rather than compete can lead to collusion, resulting in higher prices and less benefit to consumers, moving away from the social optimum. Competition policy aims to prevent such cooperation to ensure markets remain competitive and efficient.

To Move the Allocation of Resources Closer to the Social