Question

#12

Which of the following statements are true?

Statement 1: The output level in an oligopoly is determined at the point., where MR = MC.

Statement 2: Nash equilibrium occurs in a nongame situation when a participant is unwilling to deviate from its strategy after considering the strategies of its opponents.

a. Statement 1 only

b. Statement 2 only

c. Both statements are true.

Answer 1

Correct choice - c. Both statements are true

In any market incl. oligopoly, a producer will produce till the MR (additional revenue on production of additional 1 unit) does not exceed the MC (additional cost on production of additional 1 unit).

Nash equilibrium is an outcome or a strategy when neither of the players wish to shift to the other strategy given the strategy of others. There can be multiple Nash equilibria which imply that there can be situations in the same game where the players can reach more than one outcome and still be unwilling to shift to another outcome. In other words, Nash equilibrium is the best strategy available to player A given a particular strategy of player B.