b) Localized markets Sweezy Oligopoly - based on a very specific assumption regarding how other firms will respond to price increases and price cuts. C) equilibrium price will be sensitive to small cost changes but quantity will not. A monopoly occurs when. a) prices; uncertainty; increase E) none of the above. b) potential for mergers and acquisitions A) potential entrants entering and making monopoly profit. The demand curve will look kinked to reflect the fact that rivals will match price *decreases* but ignore price *increases*. Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. c) The supply curve model It includes decisions made in concentrated markets, such as product prices, quality standards, and production planning. D) its profit will rise by the same percentage. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. 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. They do so through collusion that results in higher prices and fewer production or product choices for customers. E) Firms set prices. The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. C) Dr. Smith advertises only if Dr. Jones doesn't advertise. What kind of game is it if the firms must choose their pricing strategies at the same time? Which statement is true about oligopolies? A Computer Science portal for geeks. O D. Some barriers to entry. A) Dr. Smith advertises no matter what Dr. Jones does. B) it prevents or substantially lessens competition It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. c) harder 26) Refer to Table 15.3.4. *Prohibit the entry of new rivals, *Reduce uncertainty b) price leadership; collusion C) changes in the output of any member firms will have no impact on the market price. C) a perfectly competitive market. Furthermore, no restrictions apply in such markets, and there is no direct competition. a) Import competition Nokia, however, offers Android phones with the same features and almost similar prices. It determines the law of demand i.e. Why does a rise in the current asset to total asset ratio result in a decline in net working capital's estimate of both profits and risk? c) Localized markets Such companies have complete control of the market, earning high profits and gains in a specific sector or service. C. La sociedad se encuentra dividida entre capitalistas, terratenientes y trabajadores. 4) Which one of the following industries is the best example of an oligopoly? O B. Business Economics Consider a Cournot oligopoly with n = 2 firms. b) It will always be downward sloping because it is a price maker. C) perfectly elastic demand. B) predict that an increase in price by one firm is accompanied by price increases of other firms if every firm experiences a large enough increase in marginal cost. E) an outcome. as the price increases, demand decreases keeping all other things equal.read more shifts. b) An outcome in the payoff matrix from which both firms want to deviate since the current strategy is not optimal for either firm. E) produce the efficient quantity. B) "I am producing more widgets than Wally and I agreed to in our talk last week." It is difficult to enter an oligopoly industry and compete as a small start-up company. If one of the firms cheats on this agreement, what will happen? Impure oligopoly - have a differentiated product. However, firm B will follow the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. D) entry into the industry of rival firms will have no impact on the profit of the cartel. Which of the following represents the problem with the four-firm concentration ratio? 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. C) 2. d) easier. The characteristics of oligopoly include interdependence, product differentiation, high barriers to entry, uncertainty, price setters. How oligopolists react to the price change by one firm can be best understood with the downward-sloping Kinked demand curve. It is calculated by dividing the change in the costs by the change in quantity. The amount of time (in seconds) needed to complete a critical task on an assembly line was measured for a sample of 50 assemblies. A) "Gas prices in this town always go up and down together." b) Its demand curve is downward-sloping d) Dominant firms, What are oligopolists able to do by controlling price through collusion? c) give the appearance of increased competition Welcome to EconTips, your number one source for all things about economics. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. This market structure can be competitive and sometimes less competitive. 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]. 5.3.5 Apply Concepts of Oligopoly and Oligopoly Models .pdf. C) if Jane does not change her decision, Bob would like to change his. List the three steps followed under the gross profit method of estimating inventory. 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 ______. Sometimes there may be many firms but the large share of the industrys productive capacity is accounted for only by a few firms, the others share will be insignificant as far as the market is concerned. a) The same as monopolistic competition D) Consumers will eventually decide not to buy the cartel's output. After each player chooses his or her best strategy and sees the result, East Asian regimes tend to have similar characteristics First they are orien. 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. a. 21) It is difficult to maintain a cartel for a long period of time. As a result, both brands consistently work on the design, user interface, camera, and other aspects of their smartphones to make sure customers stick to their brand. Oligopolists do not compete with each other. D) marginal revenue curve is discontinuous. Many firms b. *The firm's profits will be lower. 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 ____. d) straight and steep Share with Email, opens mail client 4. E) is; to comply when the other firm cheats and to cheat when the other firm complies. D) All of the above. D) Bob denies and Art confesses. d) through advertising, Firms have a desire to cheat on a collusive agreement because ______. An oligopoly is an industry dominated by a few large firms. 9) Which isnota characteristic of oligopoly? In an oligopoly, dominant market players are influential enough to decide on the price of products and services. c) They move leftward and upward to a higher point on the average-total-cost curve. Strategic independence. B) both can earn an economic profit in the long run. *interindustry competition Firms are profit-maximizers. D) if Bob does not change his decision, Jane would like to change hers. Products traded or traded homogeneously become the second characteristic of oligopoly. d) can set its price and output to maximize profits. c) Nash equilibrium c) price leadership; cartel If one firm is large enough to account, which is that 80% of sales in the industry. A(n) _______ (Enter one word) is a market dominated by a few large producers of a homogeneous or differentiated product. a) Import competition d) ow to receive a payout of $12 D) not an oligopoly. E)Firms are profit -maximizers. The concentration ratio measures the market share of the. When the negotiations began, DTR had debt of$80 million and equity of $50 million. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . 3) The Nash equilibrium for a sequential game in a contestable market with locked-in first stage prices results in Which one of the following is the most important reason? b) The possibility of price wars diminishes, but profits might be lower. *To obtain lower input prices d) their profits and sales will rise. The policy implementation process has not taken in to account the life of rural peasants living in vicinity of cities. what are the 5 characteristics of an oligopoly? The market share of the firms is unequal. b) through pricing In the credit card industry, for example, Visa and MasterCard have a duopoly. *The game would eventually end in the Nash equilibrium (cell A). Oligopoly as a market structure is distinctly different from other market forms. b) its rivals match a price cut but ignore a price increase You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. A) there are only two producers of a particular good competing in the same market Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity D) Dr. Smith advertises only if Dr. Jones advertises. This has been a Guide to Oligopoly and its definition. price rigidity Element of monopoly. D) monopolistic competition. C. The choices made by one firm have a significant effect on other firms. Instead, they try different approaches, such as rewarding customers for their loyalty, differentiating their product offerings, providing sales promotion schemes, acting as sponsors, etc. 9) Which is not a characteristic of oligopoly? In December, General Motors produced 6,600 customized vans at its plant in Detroit. 31) Refer to Table 15.3.7. Here we discuss how does Oligopoly market work in economics along with its characteristics. The characteristics of an oligopoly market or oligopolistic strategy are mentioned below: Interdependence . Consequently, the output and pricing policies of a particular company can affect market conditions. The most important model of oligopoly is the Cournot model or the model of quantity competition. c) kinked An oligopoly is an industry dominated by a few large firms (Few sellers supplying, many buyers). The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________. 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. 6) According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink, the firm's The profit-maximizing price of firm B is PB(>PA) and the quantity is Xbe. c) Price war E) downward-sloping demand curve with no kink. E) None of the above. B) potential entrants entering and incurring economic loss. *Patents, *Preemptive pricing C) the same as a monopoly. D) neither is protected by high barriers to entry. C)The sales of one firm will not have a significant effect on other firms. *Reduce inputs used in production d) Its marginal revenue curve would consist of two segments Mr. mann's science students were experimenting with speed. It also means that each firm must be aware of the reaction of others to their actions. C) in a repeated game but not a single-play game. Pure (Perfect) Competition 2. 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. B) raise the price of their products. . The concentration ratio is a tool that measures the market share leading companies have in an industry. E) none of the above. Consequently, each firm must condition its behavior on the behavior of the other firms. Which of the following is not a characteristic of oligopoly? A) collusion of the participants leads to the best solution from their point of view. a) kinked and steep 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. A)Each firm faces a downward -sloping demand curve. About us. Despite having the same market share, a smaller number of firms causes oligopolists to get influenced by each others decisions, such as price cuts and increases. In these characteristics, manufacturers usually only produce and sell one product. A) raise the price if marginal revenue increases B) lower the price if the new marginal cost curve lies below the break in the marginal revenue curve C) definitely lower the price D) not change the price E) raise the price if other firms raise their prices. Required fields are marked *. E) marginal cost. The market has been shared equally by firms A and B, The cost of firm A is lower than firm BProfit maximizing the output of firms A is XA and the price is PA. Firm B adopts this price and sells XB(=XA) amount. C) other firms will raise their prices by an identical amount. debt to equity ratio and that it will be reversed whenever the presidents friend wants the c) costs; uncertainty; increase attempts to raise $425 million to use to build apartments in a growing area of Tulsa. However, the cartel system is fragile and considered illegal in many parts of the world as it includes increased technical and quality standards, mutually agreed pricing or price-fixingPrice-fixingPrice 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.read more, etc. D) increase the amount they produce. 1) A cartel is a group of firms which agree to A) each firm can act like a monopoly. Each firm is so large that its actions affect market conditions. they set up a 1 meter (100 cm) track. Oligopolists offer comparable products or services, so they control prices rather than the market. *The firm's profits will be higher. E) a cartel. d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition d) monopolistically competitive market, The study of how one firm reacts to the actions taken by another firm or individual when implementing a strategy is called _____. A) zero economic profits in the long-run. A) a market where three dominant firms collude to decide the profit-maximizing price. B) total revenue. We are dedicated to providing you with the very best in economics knowledge, with an emphasis on microeconomics and macroeconomics. a) Import competition Have you a question about something that I covered. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. . An oligopoly exists when a market is dominated by a small number of suppliers or firms. E) a market with two distinct products. A) all members of the cartel have a strong incentive to abide by the agreed-upon price. 30.331.934.432.831.132.230.736.830.530.634.533.130.131.030.730.930.730.230.637.931.131.134.630.233.132.130.631.530.230.330.930.031.630.234.434.230.230.131.434.133.732.732.432.831.030.733.435.730.730.4. Established firms in the market may take strategic actions to prevent new entries. In the graph, the price elasticity of demand is ______ below the price of P0. E) rivalry of the participants leads to the worst solution from their point of view. E 12) Because an oligopoly has a small number of firms A) each firm can act like a monopoly. 13) A dominant firm oligopoly might be one for which the Herfindahl-Hirschman Index is a) low to receive a payout of $15 A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ______. For example, when a government grants a patent for an invention to one firm, it may create a monopoly. 9) In the dominant firm model of oligopoly, the dominant firm faces a Prisoners' dilemma describes a case where Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. from chapter 12 ^-^, What is the only stable outcome in a payoff matrix? Oligopolists in an oligopolisticmarket structure agree not to raise their prices but match only price cuts to avoid price rigidity. A) is; all other firms act as if they are perfectly competitive B) is not; other firms can enter, which increases supply, decreases the price, and drives economic profit down to zero Because of their large size and minimal competition, each firm in an oligopoly market structure influences the others. the students used balls . This represents what kind of problem with the four-firm concentration ratio? *The game would temporarily move to either cell B or cell C. E) Bud and Miller each have a dominant strategy. Barriers to entry into an oligopoly most resemble those of a ______. Small Number of Number: The number of firms in an oligopoly market is small where each firm controls an important proportion of the total supply. Oligopoly is a market structure characterized by a few firms. Oligopolies exist and do not attract new rivals because A) of competition. If productivity can be increased to $0.11 vans per labor hour, how many hours would the average laborer work that month? c) inflexible Some of its fundamental characteristics include the existence of a small number of firms, differentiated or homogeneous products, and barriers to entry. Answers: 1 Show answers Another question on Social Studies. What does a demand curve look like for an oligopolistic firm? B) 1. a) its rivals collude Updated: Aug 16, 2022. command economy, economic system in which the means of production are publicly owned and economic activity is controlled by a central authority that assigns quantitative production goals and allots raw materials to productive enterprises. D) assumes that competitors will match price cuts and ignore price increases. *localized markets, *dominant firms *increasing sales and output The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. C) both have MR curves that lie beneath their demand curves. d. Consequently, the sales of the other firm will be definitely reduced by the same percentage. The point at which an upward-sloping marginal cost curve intersects a downward-sloping marginal revenueMarginal RevenueThe marginal revenue formula computesthe change in total revenue with more goods and units sold." They are What are the 4 characteristics of oligopoly? Compared to pure monopolies, oligopolies ______. b) are always less efficient Pure because the only source of market power is lack of competition. b) Collusive pricing model found that the most prevalent disorder was In first-degree price discrimination, a monopolist charge each customer the highest price the customer is willing to pay. C) rules, strategies, profit, and outcome. In doing so, they reduce production and increase prices, a phenomenon called collusion. Instead, they collaborate on various fronts, such as economies of scaleEconomies Of ScaleEconomies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. B) Firms are profit-maximizers.C) The sales of one firm will not have a significant effect on other firms. e) increasing search time. 300 laborers were employed at the plant that month. 2003-2023 Chegg Inc. All rights reserved. c) may be less desirable because they are not regulated by government to protect consumers e) undefined, In the graph, the price elasticity of demand is highly ______ above the price of P0. B) is not; to comply when the other firm cheats and to cheat when the other firm complies The marginal revenue formula computesthe change in total revenue with more goods and units sold." 0. A situation where firms meet to fix prices, divide markets, or restrict competition is called ______. B) marginal cost curve is discontinuous. In a monopoly, only one big brand influences the entire market without any competition. Save my name, email, and website in this browser for the next time I comment. b) Lower prices, but greater output It is assumed that all of the sellers sellidentical or homogenous products.read more, monopoly, and monopolistic competition. 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. Collusion becomes more difficult as the number of firms ____. *It lowers search costs of information for consumers.
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