An oligopolist will increase production if the output effect is:
A)less than the price effect
B)greater than the price effect
C)equal to the price effect
D)greater than or equal to the price effect

Question

Quizplus · Accepted Answer

An oligopolist will increase production if the output effect (the effect of producing one additional unit) is greater than the price effect (the effect of a lower price for each unit sold). This is because the additional revenue from selling one more unit outweighs the decrease in revenue from selling each unit at a lower price. Therefore, the oligopolist would choose to increase production in order to maximize profits.

An Oligopolist Will Increase Production If the Output Effect Is