When two or more large firms have rivalrous manners in an oligopoly market, the price of products would_______ and the output would_______________. The level of efficiency would______________.

Question

BlackTom AI · Accepted Answer

When oligopolistic firms behave rivalrously (compete rather than collude), they push the market toward more competitive outcomes: price falls, quantity rises, and efficiency improves.

1. Relevant knowledge points and concepts
- Oligopoly: a market dominated by a few large firms. Behavior can be collusive (cartel-like) or competitive (rivalrous).
- Collusion/monopoly-like outcome: higher prices, lower output, and greater deadweight loss (inefficiency).
- Competitive outcome: prices move closer to marginal cost, output increases, deadweight loss shrinks, improving allocative efficiency; firms may also move toward productive efficiency through competitive pressure.

2. Step-by-step reasoning
- If firms are rivalrous, they undercut each other (price competition or increased output) to gain market share.
- Undercutting reduces the market price relative to the collusive/monopoly price.
- Lower price induces higher market demand at that price, so total output supplied increases.
- As price approaches marginal cost, the gap between price and marginal cost narrows, reducing deadweight loss and improving allocative efficiency. Competitive pressure can also push firms to lower average costs (productive efficiency).

3. Intermediate “calculation” steps (conceptual)
- Collusive price Pc > marginal cost (MC), output Qc < competitive Q*
- Rivalrous behavior → price moves down toward MC, so P↓, and quantity moves up toward Q* (Q↑)
- Deadweight loss (area between demand and MC not produced) shrinks → efficiency↑

4. Why the correct answer is correct
- The described chain (price decreases; output increases; efficiency increases) exactly matches the consequences of rivalry in oligopoly.

5. Why other options are incorrect
- Options stating price increases conflict with the competitive undercutting logic (so a and c are wrong).
- Options that pair decreased price and increased output but claim efficiency decreases (d) are wrong because increased competition reduces deadweight loss and raises allocative efficiency.

Conclusion: The correct choice is b. decrease; increase; increase, which matches the provided answer.

When two or more large firms have rivalrous manners in an oligopoly market, the price of products would_ and the output would_. The level of efficiency would______.单项选择题

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When two or more large firms have rivalrous manners in an oligopoly market, the price of products would_______ and the output would_______________. The level of efficiency would______________.单项选择题