A perfectly competitive market is in equilibrium and 50,00050,000 units are being produced

Marketing Jan 09, 2021

A perfectly competitive market is in equilibrium and 50,00050,000 units are being produced. If four firms take over this market and a Cournot oligopoly is formed, what is the new total equilibrium quantity produced?

(a) 40,00040,000

(b) 62,50062,500

(d) 60,000

Expert Solution

The answer is (a).

When the market structure switches from perfect competition to an oligopoly, the quantity produced will be lower due to lack of competition, and the price will be higher. Since the competitive market output is 50,000 units, the oligopoly output must be lower than 50,000 units. The only possible choice is a).

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote