Explain how the output effect and the price effect influence the production decision of the individual oligopolist
Since the individual oligopolist faces a downward-sloping demand curve, she realizes that if she increases output, all output must be sold at a lower market price. As such, the revenue from selling the additional units at the lower market price must exceed the loss in revenue from selling all previous units at the new lower price. Otherwise, profits will fall as output (production) is increased.
You might also like to view...
Which of the following would be included in a person's life-cycle wealth?
a. savings account b. refrigerator c. stock in a corporation d. government savings bonds e. income
Figure 5-5
In Figure 5-5, if the household is spending enough of its budget to purchase 4 orders of fries and the price of an order of fries is $2, the remainder of the budget available for hamburgers is
a.
$10.
b.
$12.
c.
$16.
d.
$20.