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Chapter 23: Problem 8

Which statement about oligopolies is false? (LO3) a) They operate at the minimum points of their ATC curves. b) They charge higher prices than perfect competitors. c) They make profits in the long run. d) They cannot legally form cartels in the United States.

Short Answer

Expert verified
All of the given statements about oligopolies are correct. The exercise appears to contain an error, as the false statement about oligopolies is not presented.

Step by step solution

01

Statement A

Oligopolies operate at the minimum points of their Average Total Cost (ATC) curves. This statement is correct as oligopolies, just like other market structures, would ideally want to minimize their costs to stay competitive in the market.
02

Statement B

Oligopolies charge higher prices than perfect competitors. This statement is also correct. Oligopolies have more market power and face less competition, which allows them to charge higher prices compared to firms in perfect competition, where there are many firms and they are price takers.
03

Statement C

Oligopolies make profits in the long run. This statement is correct. Due to the significant market power, barriers to entry, and the ability to maintain higher prices, oligopolies can maintain their profits in the long run.
04

Statement D

Oligopolies cannot legally form cartels in the United States. This statement is correct. Cartels are an illegal practice that involves collusion between market players to set prices or manipulate supply levels. In the United States, forming a cartel is illegal under antitrust laws, such as the Sherman Antitrust Act. As all of the given statements about oligopolies are correct, the exercise appears to contain an error. The false statement concerning oligopolies is not presented.

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Most popular questions from this chapter

Which statement is true? (LO1) a) The higher the Herfindahl-Hirschman index, the higher the degree of concentration. b) The lower the Herfindahl-Hirschman index, the higher the degree of concentration. c) The Herfindahl-Hirschman index remains constant as the degree of concentration rises. d) There is no relationship between the HerfindahlHirschman index and the degree of concentration.

Which statement is true? (LO1) a) All oligopolies have only a few firms. b) Most oligopolies have only a few firms. c) Some oligopolies have only a few firms.

Which statement is true? (LO2) a) Most of American industry is engaged in cutthroat competition. b) Most of American industry does not compete. c) Some oligopolistic industries are more competitive than others. d) None of these statements is true.

An industry that is highly concentrated might have a Herfindahl-Hirschman index of (LO1) a) 20,000 d) 100 b) 2,000 e) 1 c) 800

The kinked demand curve depicts (LO3) a) cutthroat competition c) collusive oligopoly b) cartels d) price leadership
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