Question

What outcomes are possible under oligopoly?

Answer 1

since the Oligopoly market, there are few large firms who control whole market.

Hence there is restriction on the output production, therefore there is control on the prices. It means high prices and lower output reduces consumer surplus.

Since price is greater than MC, therefore there is restriction of new firms, that's why there is higher prices.

Since output production is less than the optimal level, therefore there is efficiency loss.

Since oligopoly firm engage in high advertisement for capturing more share of the markets. This leads to more costs and these costs burden falls on the consumers in the form of high price and therefore consumer surplus decreases.