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

Question

Quizplus · Accepted Answer

The output effect is the additional revenue generated by producing one more unit of output, while the price effect is the reduction in price that occurs when a firm increases its output. An oligopolist will increase production as long as the increase in revenue (output effect) is greater than the decrease in price (price effect). Therefore, if the output effect is greater than the price effect, the oligopolist will increase production.

An Oligopolist Will Increase Production If the Output Effect Is