NSE4_FGT-6.4 Exam Questions and Answers

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NEW QUESTION: 1
A profit-maximizing oligopolist will typically set price
A. higher than the purely competitive level but lower than the level that would maximize the industry's profits.
B. at the intersection of his average total cost and demand curves.
C. at the intersection of his marginal cost and demand curves.
Answer: A
Explanation:
By setting price below the point dictated by the cartel (i.e., the point that maximizes joint cartel profits), the firm can cheat on the collusive agreement and earn higher profits. The firm will not set the price equal to the competitive level because that would imply zero economic profits, which the firm is hoping to exceed.


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