The quantity that is set by the dominant firm in an oligopolistic industry:
A) is based on the price set by other firms.
B) is at the level where its marginal revenue and marginal cost are equal.
C) is equal to the total industry output.
D) ensures that there is zero economic profit in the industry.
E) is equal to the output produced in a perfectly competitive industry.

Question

Quizplus · Accepted Answer

In an oligopolistic industry, the dominant firm sets its output quantity where its marginal revenue and marginal cost are equal, in order to maximize its profit. This is known as the profit-maximizing quantity. So, option B is the correct choice. The other options are incorrect because they do not reflect the behavior of a dominant firm in an oligopolistic industry.

The Quantity That Is Set by the Dominant Firm in an Oligopolistic