Increasing Returns to Scale can lead to an oligopolistic market structure because Group of answer choices if the larger firms already in the industry have lower Long-run Average Total Costs, new smaller entrants will not be able to produce at the low costs achieved by the big established firms already in the industry. if the firms already in the industry have Increasing Returns to Scale, their Average Total Costs remain constant as they produce more output. the few firms already in the industry will always engage in illegal behavior to keep new entrants out of the industry. there are no barriers to entry in an oligopolistic industry.
Added by Juan Carlos F.
Step 1
Increasing Returns to Scale occur when a firm's output increases by a larger proportion than the increase in inputs, leading to lower average costs as production expands. Show more…
Show all steps
Your feedback will help us improve your experience
Jennifer Stoner and 86 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
The mutual interdependence that characterizes oligopoly arises because: the products of various firms are homogeneous. the products of various firms are differentiated. a small number of firms produce a large proportion of industry output. the demand curves of firms are kinked at the prevailing price. If there are significant economies of scale in an industry, then: a firm that is large may be able to produce at a lower unit cost than can a small firm. a firm that is large will have to charge a higher price than will a small firm. entry to that industry will be easy. firms must differentiate their products to earn economic profits. Game theory can be used to demonstrate that oligopolists: rarely consider the potential reactions of rivals. experience economies of scale. that oligopolists can increase their profits through collusion. may be either homogeneous or differentiated.
Jennifer S.
If a firm finds that it could reduce its long-run average total cost by increasing output, then it must be experiencing A coordination problems. B diseconomies of scale. C constant returns to scale. D economies of scale.
Chandra J.
A unique feature of an oligopolistic industry is: low 'barriers to entry'. standardized products. diminishing marginal returns. mutual interdependence between firms.
Madhur L.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD