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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

If an oligopolistic industry organizes itself as a cooperative cartel, it will produce a quantity of output that is ________the competitive level and _________ the monopoly level.

a. less than, more than

b. more than, less than

c. less than, equal to

d. equal to, more than

To determine
Oligopoly market and cartel.

Explanation

Option (c):

If an oligopolistic industry organizes itself as a cooperative cartel, it will produce a quantity of output that is less than the competitive level and equal to the monopoly level.

When a cartel is formed, the market is just like a monopoly, and the member firms will agree on the monopoly outcome because that outcome maximizes the total profit of each member firm. As compared to the competitive market, it produces less quantity of output, but it produces a quantity of output that equals to the monopoly level. Thus, the option “c” is correct.

Option (a):

The oligopoly cartel will produce a quantity of output that is less than the competitive level and equal to the monopoly level...

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