Economics Perfect Competition Questions
In oligopoly, economic profit plays a crucial role in determining the behavior and actions of firms. Unlike in perfect competition, where firms strive to maximize economic profit, in oligopoly, firms often prioritize market share and competitive advantage over maximizing profit. This is because in an oligopolistic market structure, there are only a few dominant firms that control a significant portion of the market. As a result, these firms engage in strategic decision-making, such as price-fixing, collusion, or non-price competition, to maintain their market power and limit competition. Therefore, economic profit in oligopoly serves as a measure of success and market dominance rather than the primary objective for firms.