An oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence. That means higher the price, lower the demand. A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ______. D) "I have been spending extra on research and development of my new two-way widget." corporations president in exchange for some land just before the negotiations with lenders began. 4) Which one of the following industries is the best example of an oligopoly? a) The number of average-sized firms in an industry needed to produce sales equivalent to the four largest firms Because of their large size and minimal competition, each firm in an oligopoly market structure influences the others. Each firm is so large that its actions affect market conditions. A) the government will impose price controls. The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. This is different compared to the perfectly competitive market and the monopolistic market that consist of a large number of sellers whereas there is only one sole seller in the monopoly market. D) is not; to comply when the other firm complies and to cheat when the other firm cheats Essay on Oligopoly, Perfect Competition, Cournot's and Bertrand's Examples of oligopolies Car industry - economies of scale have caused mergers so big multinationals dominate the market. found that the most prevalent disorder was a) low to receive a payout of $15 d) import competition, Suppose the rivals of an oligopolistic firm match either a price increase or decrease. Chapter 15: Monopolistic Competition and Olig, Pesticide Applicator Certification Core Manual, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal. read more, and marginal revenue is the product price. Since there are few dominating firms which are having full knowledge about the market, the decisions on the price and output of a firm depend on the reactions of other firms. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. Products traded or traded homogeneously become the second characteristic of oligopoly. Oligopoly as a market structure is distinctly different from other market forms. As in an oligopoly market, the decision of one firm influences the process and working of another firm. *localized markets, *dominant firms C) the HHI for the industry is small. . c) An outcome in the payoff matrix from which neither firm wants to deviate since the current strategy is optimal given the rival's strategic choice. The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. What does a demand curve look like for an oligopolistic firm? Required fields are marked *. d) its rivals match price decreases but ignore price increases, d) its rivals match price decreases but ignore price increases, Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? C) 2. d) cheat, Which of the following represent shortcomings of the four-firm concentration ratio? *Prohibit the entry of new rivals, *Reduce uncertainty b) product development and advertising are relatively difficult to copy b) Localized markets Which of the following is not a characteristic of oligopoly? a. the c) threatens 6. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. 2. c) Firms' advertising decisions are interdependent. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. When firm X increases its price. We are dedicated to providing you with the very best in economics knowledge, with an emphasis on microeconomics and macroeconomics. C) strategies What are examples of monopoly and oligopoly? Due to minimal competition, each of them influences the rest through their actions and decisions. Each firm is so large that its actions affect market conditions. They believe in making customers stick to their brands for core competenciesCore CompetenciesThe core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. Question: Which of the following is NOT a characteristic of an oligopoly? D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. It is difficult to enter an oligopoly industry and compete as a small start-up company. b) competitively Solved Which of the following is NOT a characteristic of an - Chegg A) a market where three dominant firms collude to decide the profit-maximizing price. A Which of the following is not a characteristic of oligopoly? A cartel is a group of producers of goods or suppliers of services formed through an agreement amongst themselves to regulate the supply of goods or services with the basic intent to illegally regulate the prices or restrict competition regarding the said goods or services. B) each member will face the temptation to cheat on the cartel price to increase its sales and profit. D) the four-firm concentration ratio for the industry is small. Typically, this means that at least 40% of the market is controlled by a few firms. Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity a. b) neither productive efficiency nor allocative efficiency This market structure can be competitive and sometimes less competitive. The four-firm concentration ratio is based on the ___. D) 2,750. B) a market where two firms compete for profit and market share. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . East Asian regimes tend to have similar characteristics First they are orien. These firms are large enough that their quantity influences the price and so impacts their rivals. c) competition Cost of firm A is lower than firm B Profit maximizing price and quantity of firm A is PA and XA respectively. Increasing returns to scale is a term that describes an industry in which the rate of increase in output is higher than the rate of increase in inputs. Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making. Hence, undoubtedly it will react to the price reduction decision. However, DTR does not intend to build any single family homes. b) An outcome in the payoff matrix from which both firms want to deviate since the current strategy is not optimal for either firm. What happens to oligopolistic firms when a recession occurs? *interindustry competition a) The possibility of price wars diminishes and profits are maximized. characterized by the presence of a few large firms who produces D) Bob denies and Art confesses. This way, Samsung and Nokia ensure non-price competition by enhancing core capabilities to build a loyal customer base. The payoffs in the table are the economic profit made by Bud and Miller. d) lowering the cost of production Over a long time period, cheating ______ collusive oligopolies This has been a Guide to Oligopoly and its definition. E) marginal revenue curve is upward sloping. But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. Characteristics and Features of Oligopoly (6 Answers) For example, the existing firms might threaten to reduce the price drastically if entry occurs. D) increase the amount they produce. 31) Refer to Table 15.3.7. Lets identify the oligarchy before identifying the characteristics of an oligopoly. D. 2021. What are the positive effects of large oligopolists advertising? d) It will always be U-shaped. Top 9 Characteristics of Oligopoly Market - Economics Discussion In other words, when there are two or more than two, but not many, producers or sellers of a product, oligopoly is said to exist. Marilyn has been involved in negotiations between DTR and prospective lenders as DTR E) specify what happens if costs change. It thus limits the competition to only those already in the group. A) there are only two producers of a particular good competing in the same market When this structure is in place for an economy, then only a small number of producers, distributors, and sellers interact with the customer base to distribute items. ), Oligopolists often compete through product development and advertising instead of price because ______. Pure (Perfect) Competition. D) the one producer of two goods sells the goods in a monopoly market B) monopolists. If one firm is large enough to account, which is that 80% of sales in the industry. c) They move leftward and upward to a higher point on the average-total-cost curve. Firm B adopts this price and sells XB(Which of the following are characteristics of oligopolistic markets Which of the following represents the problem with the four-firm concentration ratio? True or false: A cartel abides by a formally written agreement that specifies the output and price of each member firm and is a form of overt collusion. D) Bud has a dominant strategy but Miller does not. c) By changing pricing strategies Strategic independence. B) interdependence of firms. a) are monopolies e) price changes are typically expensive, b) product development and advertising are relatively difficult to copy, Oligopolies are not a desirable market structure because they achieve ______. Which of the following is not a characteristic of oligopoly? Oligopoly theory | Industrial economics | Cambridge University Press Oligopoly: Definition, Characteristics and Concepts - Toppr-guides C) if Jane does not change her decision, Bob would like to change his. E) more elastic than the demand just above the price at the kink. c) inflexible c) kinked-demand A few firms control most of the production and sale of a product. d) Mutual interdependence. D)There is more than one firm in the industry. The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________. Furthermore, no restrictions apply in such markets, and there is no direct competition. An oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing. Oligopolies are typically composed of a few large firms.