CFA Practice Question

CFA Practice Question

In an oligopolistic market, we expect that at equilibrium (oligopolists maximizing profit etc.):
A. Equilibrium Quantity Produced = Quantity at which Marginal Cost is minimum = Quantity at which Average Cost is minimum.
B. Equilibrium Quantity Produced > Quantity at which Marginal Cost is minimum = Quantity at which Average Cost is minimum
C. Equilibrium Quantity Produced > Quantity at which Marginal Cost is minimum > Quantity at which Average Cost is minimum
Explanation: This is what happens when for profit maximization output is set at a point where MC = MR, and the demand curve is downward sloping.

User Contributed Comments 1

User Comment
ConnerVP1 But the Quantity at which MC is minimum is less than the quantity at which AC is minimum, so it should be:

Q*>Q(AC is minimum)>Q(MC is minimum)

???
You need to log in first to add your comment.