Question

5) The goal of an oligopoly is to maximize

 A) Market share to achieve long-run economic profit.

 B) Short-run profit to achieve long-run market share.

 C) Profit in the short run and to minimize cost in the long run.

 D) Short-run profit to achieve long-run maximum revenue. 

6) An increase in the price of butter is likely to cause:

 A) the demand for butter to stay the same. B) the demand for butter to increase. FACES C) the demand for margarine to increase. D) the demand for margarine to stay the same.

Answer 1

5. Option (A) is correct.

Explanation -

The goal of an oligopoly is to maximize market share to achieve long run economic profit.As the number of firms in oligopoly are small.They are interdependent on the decesion of one another.The decesion of one firm may impact the decesions of other firms in industry.In oligopoly market, there are more than two sellers selling homogenous or differentiated products so these firms tries to maximize market share to achieve long run economic profit.

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6.Option (C) is correct.

Explanation -

An increase in the price of butter is likely to clause the demand for margarine to increase.As butter and margarine are substitute of each other. An increase in price of one product increases the demand for its substitute product.

So when price of butter increases,demand for margarine increases.