Question

As a group, oligopolists earn the highest profit when they a. achieve a Nash equilibrium. b. produce a total quantity of output that exceeds the Nash-equilibrium total quantity. c. produce a total quantity of output that falls short of the Nash-equilibrium total quantity. d. charge a price that falls short of the Nash-equilibrium price.

Answer 1

Answer: The correct answer is "c. produce a total quantity of output that falls short of the Nash-equilibrium total quantity."

Explanation:  When oligopolists act together, it is called collusion. Collusion refers to cooperation between different companies. Companies collude in some way to establish prices and production levels. In this way, they can act as monopolists and establish a high price and a level of production that does not reach the total amount of Nash equilibrium which produces the maximum benefit as a group.