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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

The key feature of an oligopolistic market is that

a. each firm produces a different product from other firms.

b. a single firm chooses a point on the market demand curve.

c. each firm takes the market price as given.

d. a small number of firms are acting strategically.

To determine
The key feature of oligopoly market.

Answer

Option “d” is correct.

Explanation

Sub part (d):

In an oligopoly, there are few numbers of sellers selling identical products. The key feature of an oligopoly is a small number of firms acting strategically or firms acting just like a union. It can be termed as cartel. The firms are acing strategically; it will help to maximize the total profit of each member firm. Thus, option “d” is correct.

Sub part (a):

Each firm in the oligopoly produces similar and differentiated products. Thus, option “a” is incorrect.

Sub part (b):

The oligopoly firm sets the quantity demand where the marginal revenue is equal to the marginal cost and fixes the price equivalents to that point in the demand curve that is not fixed by a single firm. Thus, option “b” is incorrect.

Sub part (c):

The firm sets the quantity demand where the marginal revenue is equal to the marginal cost and fixes the price equivalent to that point in the demand curve. Thus, option “c” is incorrect.

Concept

Concept introduction:

Oligopoly market: Oligopoly is a market structure with few numbers of large sellers, offering similar or identical products.

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