Question

اWhen oligopolists collude and act as a monopoly, they charge a price above marginal cost. When they act independently, they charge a price equal to marginal cost : True or False

Answer 1

True

When oligopolists collude, they act as monopoly and would set a price which is above the marginal cost. By setting such a price, they try to maximize the profit of the whole industry. When oligopolists act as independent firms, they charge a price equal to marginal cost. They act more like competitive firms. They reduce the price inorder to attract more consumers. This reduction is taken by the rivals as well. And finally, the independent firms would reduce it to a point where price equals marginal cost.