Question

Oligopolists are allocatively and productively inefficient in the markets because ________. they typically operate at a level of output where price is greater than marginal cost and do produce at the minimum point on their average cost curves. they typically operate at a level of output where price is greater than marginal cost and do not produce at the minimum point on their average cost curves. they typically operate at a level of output where price is less than marginal cost and do not produce at the minimum point on their average cost curves.

Answer 1

The correct answer is option D.

Step-by-step explanation:

Oligopoly is a market structure in which there are few firms. There is a restriction on entry of new firms and exit of the existing firms.

These few firms are interdependent on each other. There is high degree of competition in the market.

The firms are not uniform in size. Some are large and dominant while others are small.

The firms in oligopoly are both allocatively as well as productively inefficient. This is because, they neither minimize their cost nor produce efficient output.

The firms operate at a point where the price is greater than marginal cost and the average cost is not minimum.