strategies that can occur when oligopolies compete.

Alternatively, consider a situation, again in the setting of Figure 7.11 (a), where the bottom of the long-run

average cost curve is 10,000, but total demand for the product is only 5,000. (For simplicity, imagine that this

demand is highly inelastic, so that it does not vary according to price.) In this situation, the market may well

end up with a single firm—a monopoly—producing all 5,000 units. If any firm tried to challenge this monopoly

while producing a quantity lower than 5,000 units, the prospective competitor firm would have a higher

average cost, and so it would not be able to compete in the longer term without losing money. The chapter on

Monopoly discusses the situation of a monopoly firm.

Thus, the shape of the long-run average cost curve reveals whether competitors in the market will be different

sizes. If the LRAC curve has a single point at the bottom, then the firms in the market will be about the same
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