Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Since the individual oligopolist faces a downward-sloping demand curve, she realizes that if she increases output, all output must be sold at a lower market price. As such, the revenue from selling the additional units at the lower market price must exceed the loss in revenue from selling all previous units at the new lower price. Otherwise, profits will fall as output (production) is increased.