D) the one producer of two goods sells the goods in a monopoly market These data are as follows: 30.334.531.130.933.731.933.131.130.032.734.430.134.631.632.432.831.030.230.232.831.130.733.134.431.032.230.932.134.230.730.730.730.630.233.436.830.231.530.135.730.530.630.231.430.730.637.930.334.130.4\begin{array}{lllll}30.3 & 34.5 & 31.1 & 30.9 & 33.7 \\ 31.9 & 33.1 & 31.1 & 30.0 & 32.7 \\ 34.4 & 30.1 & 34.6 & 31.6 & 32.4 \\ 32.8 & 31.0 & 30.2 & 30.2 & 32.8 \\ 31.1 & 30.7 & 33.1 & 34.4 & 31.0 \\ 32.2 & 30.9 & 32.1 & 34.2 & 30.7 \\ 30.7 & 30.7 & 30.6 & 30.2 & 33.4 \\ 36.8 & 30.2 & 31.5 & 30.1 & 35.7 \\ 30.5 & 30.6 & 30.2 & 31.4 & 30.7 \\ 30.6 & 37.9 & 30.3 & 34.1 & 30.4\end{array} The distinguishing characteristics of oligopoly are briefly explained below: 1. A monopoly occurs when. *Reduce inputs used in production Barriers to entry into an oligopoly most resemble those of a ______. 13) A dominant firm oligopoly might be one for which the Herfindahl-Hirschman Index is Based on the elasticity of demand and its response to the price change, the demand curveDemand CurveDemand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. An oligopoly is an industry dominated by a few large firms. Companies often merge to ______ monopoly power. B) monopolists. A) there are fewer than 6 firms in a market Besides, high capital requirements, licensing, patents, market demand, economies of scale, limit-pricing, and customer loyalty restrict the entry of new businesses. 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. a) An outcome in the payoff matrix from which one firm wants to deviate since the current strategy is not optimal given the rival's strategic choice. Gentleman's agreements are a type of covert collusion, occurring in social settings where a product's _____ is agreed upon and market shares are determined by _____ competition. Course Hero is not sponsored or endorsed by any college or university. Pure or Perfect Oligopoly: If the firms produce homogeneous products, then it is called pure or perfect oligopoly. A) a market where three dominant firms collude to decide the profit-maximizing price. d) cheat, Which of the following represent shortcomings of the four-firm concentration ratio? Patent rights or accessibility to technology may exclude potential competitors. a) They move downward and to the right to a lower operating point on the average-total-cost curve. *interindustry competition Compared to pure monopolies, oligopolies ______. B) rivalry among a large number of rivals leads to lower overall profit. D) not an oligopoly. If one firm is large enough to account, which is that 80% of sales in the industry. a) prices; uncertainty; increase Characteristics: There are few firms in the market serving many consumers. A non-collusive oligopoly refers to a market situation where the firms compete with each other rather than cooperating. Which of the following is not a characteristic of oligopoly? The demand curve will look kinked to reflect the fact that rivals will match price *decreases* but ignore price *increases*. And rest of the businesses or minor players follow the same. 2003-2023 Chegg Inc. All rights reserved. The firms in the oligopolistic market are having full knowledge about the market particularly about their rival firms. c) game theory 5) Which one of the following is not a feature common to all games? If the products of the firms are homogeneous then the interdependence will tend to be strong because of the perfect substitutability of the products of the firms. B) assumes marginal cost is constant. Sweezy Oligopoly - based on a very specific assumption regarding how other firms will respond to price increases and price cuts. Is Microsoft an oligopoly Do you want to know Click Here. *To obtain lower input prices characterized by the presence of a few large firms who produces read more, market demand, and product differentiationProduct DifferentiationProduct differentiation refers to making a product look attractive and different from other products in the same class. A) the government will impose price controls. b) Localized markets A) specify the technology of production. *The firm's profits will be lower. d) cost leadership. E) the firms are interdependent. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. c) product development and advertising are relatively inexpensive Oligopoly is a market structure characterized by a few firms. b) Demand is highly elastic below the going price The payoffs in the table are the economic profit made by Bud and Miller. marginal cost pricing The joining of firms that are producing or selling a similar product is a horizontal merger Suppose an industry has total sales of $25 million per year. E) a cartel. a. . c) horizontal or perfectly elastic Oligopoly. a) low to receive a payout of $15 1) All games share four common features. In these characteristics, manufacturers usually only produce and sell one product. That is, the firm is myopic or short sighted not to learn from its past mistakes and take d 1 d'1, as if it will not shift. *Prohibit the entry of new rivals. Oligopolistic firms do which of the following when they change their pricing strategies? For example, when a government grants a patent for an invention to one firm, it may create a monopoly. The concentration ratio is a tool that measures the market share leading companies have in an industry. d) easier. c) through product development Four characteristics of an oligopoly industry are: Few sellers. c) kinked Economists identify four types of market structures: (1) perfect competition, (2) pure monopoly, (3) monopolistic competition, and (4) oligopoly. The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________. *It enhances competition and reduces monopoly power. Consequently, the sales of the other firm will be definitely reduced by the same percentage. E) a competitive market produces two goods. c) allocative efficiency but not productive efficiency Without collusion, if a firm incorrectly assumes that its rivals will charge the same price but its rivals actually charge a lower price, the firm's demand curve will shift to the ____. 10) In the dominant firm model of oligopoly, the dominant firm produces the quantity at which marginal revenue equals c) The supply curve model Its main characteristics are discussed as follows: 1. This way, Samsung and Nokia ensure non-price competition by enhancing core capabilities to build a loyal customer base. Interdependence C) equilibrium price will be sensitive to small cost changes but quantity will not. Click the card to flip Definition 1 / 84 E) the firms are interdependent. D) There is more than one firm in the industry. The control of oligopolists over specialized inputs, such as resources, price, and production, makes it difficult for a new firm to survive. Answers: 1 Show answers Another question on Social Studies. d) can set its price and output to maximize profits. In second-degree price discrimination the monopolist offers a menu of quantity-based pricing options designed to induce customers to self-select based on how highly they value the product. It continues to behave on the assumption that its new demand (d 1 d' 1 ) will not shift further because the effect of its own decisions on other sellers' demand would be negligible. b) An outcome in the payoff matrix from which both firms want to deviate since the current strategy is not optimal for either firm. C) is; to cheat regardless of the other firm's choice A) "Gas prices in this town always go up and down together." 13) A tit-for-tat strategy can be used Answer: An oligopoly is an industry which is dominated by a few firms. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. d) does not influence. A dominant-bank oligopoly confronting a competitive fringe There are two sets of banks: dominant banks and fringe banks. c) may be less desirable because they are not regulated by government to protect consumers c) Its marginal cost curve is made up of two segments Why is collusion desirable to oligopolistic firms? When firm X increases its price. . D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. *The firm is failing to produce at the profit-maximizing output. Production Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. *Preemptive pricing 4. 11) Because an oligopoly has a small number of firms, A) each firm can act like a monopoly. D) Bob denies and Art confesses. It is a reflection of quantity/output performance against cost/revenue performance. True or false: A one-time game occurs when firms will choose their pricing strategy for today without concern about future interactions with their rivals. Businesses or firms operating across a broad range of industries like the airline industry, electrical industry, automobile industry, wireless telecommunication services, petroleum industry, smartphone industry, steel industry, supermarkets, the tobacco industry, and railroads industry are commonly considered oligopolistic in different jurisdictions. d) have interdependent pricing. 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. a) are always more efficient a. Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it. Which scenario describes a simultaneous game? a) their prices will be unchanged B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." The distinctive feature of an oligopoly is interdependence. EconTips 2022 - All Right Reserved, Designed and Developed by Harshasoft, Perfect Competition: Definition, Graphs, short run, long run, Monopoly Price discrimination: Types, Degrees, Graphs, Examples, Monopolistic Competition Equilibrium| Long-run| Short-run. In the scenario above, the market is. Even though the products of companies A and B are similar, there must be something that distinguishes them. 5) Which one of the following characteristics applies to oligopolistic markets? B) both firms comply with the agreement. As a result, each firm obligates to adhere to pre-determined price and quantity/output levels to maximize revenue. B) there are two producers of two goods competing in an oligopoly market c) dominant firms b) are few in number a) low to receive a payout of $15 D) increase the amount they produce. The key characteristics of an oligopoly market structure include: Few firms : There are only a few firms in the market, which makes it easy for the firms to coordinate their behavior and to reach . c) Localized markets So go ahead and leave a comment below. E) marginal cost. 8) Which of the following quotes shows a contestable market in the widget industry? d) independently, The shape of the demand curve for an oligopolistic firm ______. 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. When the number of firms in an oligopolistic industry increases from 3 to 10, it is ______ to collude. If productivity can be increased to $0.11 vans per labor hour, how many hours would the average laborer work that month? The market share of the firms is unequal. They collude and agree to share the market equally. d) elastic, An oligopoly firm's demand curve will be kinked if ______. c) it will prevent a price war Oligopoly characteristics include high barriers to new entry, price-setting ability, the interdependence of firms, maximized revenues, product differentiation, and non-price competition. A) Each firm has an incentive to collude. The competing firms are few in number but each one is large enough so as to be able to control the total industry output and a moderate. Firm A and Firm B are the only producers of soap powder. 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. E)Firms are profit -maximizers. C) "Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company." In doing so, they reduce production and increase prices, a phenomenon called collusion. E) None of the above. a) Import competition Oligopolists do not compete with each other. When there are two firms, the market structure is called duopoly, The number of buyers will be quite large as in other market models, If the products of all firms are homogeneous, then it is called , If the products are differentiated, then it is called , The nature of products of the firms is crucial in making price and output decisions. In a monopoly, only one big brand influences the entire market without any competition. C) average total cost. However, firm B follows the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. The number of suppliers in a market defines the market structure. b) it will lower the firm's costs Oligopolistic behavior implies that oligopolists prefer competition ______. a) Affect profits and influence the profits of rival firms When there are two market leaders in any industry or service, this is referred to as a duopoly. *Large capital investment (Enter one word for each blank. Over a long time period, cheating ______ collusive oligopolies c) A more efficient industry When the negotiations began, DTR had debt of$80 million and equity of $50 million. Their differences can range from. a) collusion; cartel A) each firm can act like a monopoly. B) it prevents or substantially lessens competition *To increase economies of scale, *To increase market share It is difficult to enter an oligopoly industry and compete as a small start-up company. It helps avoid the potential price war and price rigidity. found that the most prevalent disorder was c) They move leftward and upward to a higher point on the average-total-cost curve. E) None of the above. The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. debt to equity ratio and that it will be reversed whenever the presidents friend wants the C) Art denies and Bob confesses. The distinctive feature of an oligopoly is interdependence. B) other firms will lower theirs. 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. 8) A weakness of the kinked demand curve theory of oligopoly is that it does not 0) If the efficient scale of production only allows three firms to supply a market, the market is a. c) It will always be kinked because it is a price maker. It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. a) Cartel That means higher the price, lower the demand. Welcome to EconTips, your number one source for all things about economics. Oligopolies exist and do not attract new rivals because A) of competition. D) monopolistic competition. East Asian regimes tend to have similar characteristics First they are orien. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. as the price increases, demand decreases keeping all other things equal. Some of its fundamental characteristics include the existence of a small number of firms, differentiated or homogeneous products, and barriers to entry. $15. B) Other firms will enter the industry. 6) Wal-Mart follows the kinked demand curve model of oligopoly. C) Parliament. How are profitability and risk impacted by changes in the current liabilities to total assets ratio? Oligopolies are typically composed of a few large firms. Monopolistic Competition and Economic Efficiency, Monopolistic Competition Equilibrium| Long-run, Short-run, What is Inflation Mean | Definitions, Types, Causes, How to Calculate the GDP [Definition & Formula], Main Theories of Inflation (With Diagram), Indifference Curve Q&A [Download Indifference Curve Pdf]. What is oligopoly and its characteristics? *The game would temporarily move to either cell B or cell C. Chapter 14 Oligopoly and Strategic Behavior L, ECON 1001: Chapter 20 (Public Finance and Exp, Test Practice Questions (Exam 3), Chapter 10, ECON 1001: Chapter 23 (Income Inequality, Pov, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, Alexander Holmes, Barbara Illowsky, Susan Dean. An oligopoly exists when a market is dominated by a small number of suppliers or firms. what are the 5 characteristics of an oligopoly? Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. There are just several sellers who control all or most of the sales in the industry. The profit-maximizing price of firm B is PB(>PA) and the quantity is Xbe. But the other firms act considering the interdependence. C. Some market power. The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products. *Increase profits C) Miller has a dominant strategy but Bud does not. Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. B) perfectly inelastic demand. *To increase market share *world trade D) All of the above. 1. D) "I have been spending extra on research and development of my new two-way widget." An oligopoly is a market state where there is a limited amount of competition available for consumers to consider. d) Dominant firms, What are oligopolists able to do by controlling price through collusion? E) both are price takers. ), Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? *It lowers search costs of information for consumers. C) both have MR curves that lie beneath their demand curves. read more, and marginal revenue is the product price. Which statement is true about oligopolies? 6) Which one of the following characteristics applies to oligopolistic markets? e) It could be downward sloping or kinked. Let us consider the followingexamplesto understand the concept better: Samsung and Nokia are two big players in the Android smartphones industry, with the former trying to capture the market by keeping the price lenient. For example, the existing firms might threaten to reduce the price drastically if entry occurs. 3) The Nash equilibrium for a sequential game in a contestable market with locked-in first stage prices results in E) an oligopoly. C) lower the price of their products. a) The same as monopolistic competition D) marginal revenue curve is discontinuous. c) Kinked-supply curve model How oligopolists react to the price change by one firm can be best understood with the downward-sloping Kinked demand curve. Given the emergence and expected evolution of AI-driven services in various niches, it is likely that there will be a highly concentrated market devoted explicitly to the AI needs of consumers. A) 0. A characteristic found only in oligopolies is A) break even level of profits. complexes. Either way, Id like to hear from you. b) Strategies are chosen for a single time period. In an oligopoly, dominant market players are influential enough to decide on the price of products and services. A) "Gas prices in this town always go up and down together." C) one prisoner has no chance to be acquitted since there is no other prisoner to support his testimony. Marginal cost formula helps in calculating the value of increase or decrease of the total production cost of the company during the period under consideration if there is a change in output by one extra unit. E) unknown. C) "If only Wally and I could agree on a higher price, we could make more profits." *Increase profits B) in a single-play game but not a repeated game. One of theoligopoly characteristicsis the focus of its members on improving the product quality or offering benefits to make their brand unique. D) is; the smaller firms cannot become the dominant firm For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly. 1) The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is, 2) Suppose that industry A consists of four firms who collectively control 96 percent of total sales in the market. B) neither player would be willing to change his or her decision unless the other player also changes his or her decision. These firms are large enough that their quantity influences the price and so impacts their rivals. C) a perfectly competitive market. D) firms in perfect competition. b) neither productive efficiency nor allocative efficiency document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . A) rules E) equilibrium price and quantity will be insensitive to small demand changes. See more documents like . D) a firm in perfect competition. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." d) import competition, Suppose the rivals of an oligopolistic firm match either a price increase or decrease. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. b) high to receive a payout of $15 b) It will always be downward sloping because it is a price maker. b) collusion model d) their profits and sales will rise. b) depends on the firm's cost structure d) is always kinked b) competitively As in an oligopoly market, the decision of one firm influences the process and working of another firm. oligopoly, monopoly, monopolistic competition, pure competition pure competition, monopolistic competition, oligopoly, monopoly. To further understand market modules follow the below topics. It can be also called as one form. d. 2. . c) Nash equilibrium The group that colludes is referred to as a cartelCartelA 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.read more. 7) The kinked demand curve theory of oligopoly predicts that C) independence of firms. A) zero economic profits in the long-run. C) other firms will raise their prices by an identical amount. ADVERTISEMENTS: This fact is recognized by all the firms in an oligopolistic industry. Hence, undoubtedly it will react to the price reduction decision. *The firm is failing to produce at the profit-maximizing output. *interindustry competition 4) Which one of the following industries is the best example of an oligopoly? A) suggests that price will remain constant even with fluctuations in demand. Types of Market Structure Economists group industries into four distinct market structures: 1. Businesses in such a market collaborate to dominate the rest of the players and maximize joint revenue. Many firms b. Price fixing is an agreement between business competitors to increase (very often), reduce (perhaps for a short time), establish, or stabilize (rarely) prices, disregarding the prices governed by the market's flow of demand and supply. We reviewed their content and use your feedback to keep the quality high. d) It will always be U-shaped. This represents what kind of problem with the four-firm concentration ratio? land back or when DTRs debt to equity position improves, what should she do? What are the 4 characteristics of oligopoly? (Enter one word per blank. d) The firms in the industry are interdependent. Which one of the following is the most important reason? c) is always downward sloping E) potential entrants taking all the business away from existing firms. E) a cartel. What kind of game is it if the firms must choose their pricing strategies at the same time? An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity D) increase the amount they produce. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Oligopoly (wallstreetmojo.com). b) greater than or equal to 50% So here we can see a one-way interdependence pattern. Oligopoly is a market with a few firms and in which a market is highly concentrated. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. a) is needed in A Which of the following is not a characteristic of oligopoly? In other words, Therefore, within the oligopoly market the "ordinary" producers must have careful preparation to follow the changes in a policy coming from the main producers. Which one of the following observations is correct? b) are less efficient because they are often regulated by the government $4. E) Dr. Smith does not advertise if Dr. Jones advertises. a) payoff The concentration ratio measures the market share of the. c) Dominant firms c) They achieve allocative efficiency because they produce at minimum average total cost. c) Firms' advertising decisions are interdependent. b) Collusive pricing model c) have no rivals a) They do not achieve allocative efficiency because their average total cost exceeds price. homogeneous or differentiated products i. We are dedicated to providing you with the very best in economics knowledge, with an emphasis on microeconomics and macroeconomics. from chapter 12 ^-^, What is the only stable outcome in a payoff matrix? b) interindustry competition Consider a simple case of three firm oligopoly. a) Firms have no control over their price. Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat.
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