Question

Under oligopoly, in the long run price will be: a. ATC > P b. ATC =...

Under oligopoly, in the long run price will be:

a. ATC > P

b. ATC = P

c. ATC < P

d.AVC = P

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Answer #1

Since in the oligopoly there are few firms who control whole markets, therefore in this market structure firms are dependent on the action of their rival firms.

There are many kinds of oligopoly firms

Cournot duopoly, Bertrand Duopoly and Stackelberg Duopoly, cartel. The aim of these kind of oligopoly is to maximize their profit.

In the long-run equilibrium

(P = min AC = MC)

In the long run, economic profits will be zero, therefore there is no attraction for entry and no disincentive to exit in the long run. It means firm Total revenue and total cost are equal.

Hence it can be said that under oligopoly, in the long run price will be.

ATC = P

Hence option b is the correct answer.

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