CFA CFA Level 1 Question of the Week – Economics

Question of the Week – Economics

  • This topic has 3 replies, 2 voices, and was last updated Feb-18 by AdaptPrep.
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  • AdaptPrep
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    Which of the following are accurate in an oligopoly with stable equilibrium?
    I. Marginal revenue is greater than marginal price.
    II. All companies are producing the same level of output.

    • I only
    • II only
    • Neither I nor II
    AdaptPrep
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    Marginal revenue at equilibrium for any type of market is equal to marginal price. If marginal
    revenue is greater than marginal price, profit is less because of
    underproduction. If marginal revenue is less than marginal price,
    overproduction digs into profit.

    All companies don’t need to produce the same amount of
    output. For one, the companies may not be on the same scale, there may be
    significant underlying differences between them. Also, the level of output is
    also determined by how the companies play the price war game, their opportunity
    to lead, their level of aggressiveness.

    Nedo
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    B) so the right answer is Neither I nor II ?

    AdaptPrep
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    Yes, the correct answer is Neither I nor II.

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