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Managerial Economics by Donald N. Stengel

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Production Decisions in Noncartel Oligopolies

Oligopolies exist widely in modern economies. However, due to the reasons just cited, most do not function as cartels. Still, since these markets have relatively few sellers and each has a significant share of market sales, in many cases the total market production by oligopoly firms is less than would be expected if the market were perfectly competitive, and prices will be somewhat higher.

From the point of theory, the expected operation of the firm in perfect competition or in monopoly/cartel is straightforward. Assuming the firm in the perfect competition sufficiently understands its production costs, it will increase volume up to the point where its marginal cost exceeds the price. For a monopolist ...

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