a) Firms have no control over their price. E) None of the above. 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. c) Dominant firms Consequently, each firm must condition its behavior on the behavior of the other firms. What is oligopoly and its characteristics? The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. However, firm B will follow the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. e) It could be downward sloping or kinked. a) Import competition E) Firms set prices. 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]. b) u-shaped (Pure) Monopoly 3. B) the firms may legally form a cartel. b) greater than or equal to 50% b) depends on the firm's cost structure C) if Jane does not change her decision, Bob would like to change his. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Which statement is true about oligopolies? Hence, undoubtedly it will react to the price reduction decision. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." What are the 4 characteristics of oligopoly? Have you a question about something that I covered. D) in neither a repeated game nor a single-play game. issued for the land? Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. 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. *It lowers search costs of information for consumers. Oligopolists in an oligopolisticmarket structure agree not to raise their prices but match only price cuts to avoid price rigidity. c) costs; uncertainty; increase a) its rivals do not respond to either a price cut or price increase 1. b) Affect profits without influencing the profits of rival firms The concentration ratio is a tool that measures the market share leading companies have in an industry. It is an essential component of marketing strategy leading to brand recognition and business growth. 2003-2023 Chegg Inc. All rights reserved. *Ownership and control of raw materials B) Other firms will enter the industry. C) "If only Wally and I could agree on a higher price, we could make more profits." The concentration ratio measures the market share of the. *The firm's profits will be lower. D) 2,750. 13) Complete the following sentence. c) Firms earn zero economic profits in the long-run. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. D)There is more than one firm in the industry. 8) 8)Which is not a characteristic of oligopoly? Interdependence a) prices; uncertainty; increase E) marginal cost. An oligopolistic firm's marginal revenue curve is made up of two segments if ______. If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs d) vertical d) Affect costs and influence the products of rival firms, a) Affect profits and influence the profits of rival firms, Which of the following is a model used to examine oligopolistic pricing? c) Kinked-supply curve model 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. c) They achieve allocative efficiency because they produce at minimum average total cost. A)Each firm faces a downward -sloping demand curve. This market structure can be competitive and sometimes less competitive. 1. Which is the simple form of oligopoly market? Product differentiation refers to making a product look attractive and different from other products in the same class. a) Its demand curve is downward-sloping Patent rights or accessibility to technology may exclude potential competitors. Pure (Perfect) Competition 2. D) assumes that competitors will match price cuts and ignore price increases. Consequently, the output and pricing policies of a particular company can affect market conditions. C) the good produced in the market has been deemed a necessity e) undefined, In the graph, the price elasticity of demand is highly ______ above the price of P0. B) marginal cost curve is discontinuous. Save my name, email, and website in this browser for the next time I comment. O D. Some barriers to entry. Oligopoly is said to prevail when there are few firms or sellers in the market producing or selling a product. *To decrease monopoly power d) both productive efficiency and allocative efficiency, b) neither productive efficiency nor allocative efficiency. b) flexible 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. 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. Each firm is so large that its actions affect market conditions. 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. How oligopolists react to the price change by one firm can be best understood with the downward-sloping Kinked demand curve. read more, and marginal revenue is the product price. 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. But the other firms act considering the interdependence. The distinctive feature of an oligopoly is interdependence. All firms stick to what has been decided, thereby ensuring price stability in the sector. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Features: Many and small sellers, so that no one can affect the market d) The same as a monopoly, By controlling ______ through collusion, oligopolists may be able to reduce ______, ______ profits and block the entry of new rivals. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. B) potential entrants entering and incurring economic loss. D) A and B. b) demand; losses; increase Raised barriers to entry, price-making power, non-price competition, the interdependence of firms, and product differentiation are alloligopoly characteristics. *The firm's demand curve will shift further to the left. b) Firms may sell a homogeneous product. In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. *Increase profits C) perfectly elastic demand. e) low to receive a payout of $8. b) Demand is highly elastic below the going price Mutual interdependence solely means that they base their decisions on how they think their rivals will react. What are the 4 characteristics of oligopoly? price rigidity Element of monopoly. Select one: O a. there are a few firms that are mutually interdependent O b. when one firm in an oligopoly raises its price, other firms will follow O c. firms may collude in order to act like a monopoly O d. barriers to entry exist to limit the entrance of new firms Firms are more likely to cheat on a collusive agreement when the economy is experiencing a _____ (Enter one word). Pure because the only source of market power is lack of competition. As their products seem visually identical, both the brands have to make sure they offer customers something that the other does not. As in an oligopoly market, the decision of one firm influences the process and working of another firm. Which one of the following observations is correct? D) the four-firm concentration ratio for the industry is small. *increasing economies of scale, *providing misleading information believes that DTRs debt to equity ratio of 1.6 is probably the minimum that lenders will accept. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. 41) Refer to Table 15.3.12. c) It will always be kinked because it is a price maker. 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 _____. What is the Nash equilibrium? d) are more efficient because cartels and collusion is always successful b) The Herfindahl model C) lower the price of their products. . a) are always more efficient 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. The other two share the rest (20%). 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} Marilyn has been involved in negotiations between DTR and prospective lenders as DTR D) marginal revenue curve is discontinuous. Barriers to entry into an oligopoly most resemble those of a ______. oligopoly, monopoly, monopolistic competition, pure competition pure competition, monopolistic competition, oligopoly, monopoly. 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. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. c) Its marginal cost curve is made up of two segments Your email address will not be published. d) It will always be U-shaped. E) Bud and Miller each have a dominant strategy. However, firm B follows the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. Due to minimal competition, each of them influences the rest through their actions and decisions. d) The market contains a few large producers. The study of how people behave in strategic situations is called _____ theory. Mutual interdependence among the firms in decision making is the essential feature of the oligopolistic market. a) increasing firm profits a) Demand is highly elastic below the going price *Cause price wars during business recessions a) price leadership Answer: An oligopoly is an industry which is dominated by a few firms. A) 0. Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. Which of the following is not a characteristic of oligopoly? d) their profits and sales will rise Which of the following is not a characteristic of an 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . However, too much price decrease can lead to a price warPrice WarA price war is a competition among the competitors of the business in lowering the price of their products to gain an advantage over their competitors in price and capture a greater market share. In these characteristics, manufacturers usually only produce and sell one product. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. found that the most prevalent disorder was e) Price leadership model, In the _______ model of oligopoly, firms react to price decreases but ignore price increases by other firms. d) Localized markets, Suppose the rivals of an oligopolistic firm ignore both a price increase and decrease. For example, when a government grants a patent for an invention to one firm, it may create a monopoly. d) Interindustry competition, Which are barriers to entry in both monopolies and oligopolies? b) its rivals match a price cut but ignore a price increase A) rules The existence of oligopoly requires that a few firms are able to gain significant market power, preventing other, smaller competitors from entering the market. An example of a pure oligopoly would be the steel industry, which has only a few producers but who produce exactly the same product. c) By changing pricing strategies a) collusion; cartel 4. d) straight and steep So when an oligopolist decreases prices to increase output, others follow the path. a. *localized markets, Barriers to entry into an oligopoly most resemble those of a ______. B) Dr. Smith does not advertise no matter what Dr. Jones does. b) are few in number We unlock the potential of millions of people worldwide. D) Consumers will eventually decide not to buy the cartel's output. Thus, the land is worth That means higher the price, lower the demand. *The game would eventually end in the Nash equilibrium (cell B or C). An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. A) Dr. Smith advertises no matter what Dr. Jones does. *It helps reduce demand for material products. D) is; the smaller firms cannot become the dominant firm A) there are fewer than 6 firms in a market A small number of sellers. E) marginal revenue curve is upward sloping. An oligopoly is an industry dominated by a few large firms. a) gentleman's agreement 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. 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). A) is; to comply regardless of the other firm's choice CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. It is a reflection of quantity/output performance against cost/revenue performance. E) specify what happens if costs change. Click the card to flip Definition 1 / 84 Oligopoly refers to a market situation or a type of market organisational in which a few firms control the supply of a commodity. b) legal What are the 4 characteristics of oligopoly? d. d) is always kinked a) Import competition $6. d) greater than or equal to 60%, How can oligopolistic firms influence their profits and the profits of their rivals? It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. 31) Refer to Table 15.3.7. 26) Refer to Table 15.3.4. ), Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? b) Its demand curve is downward-sloping E) none of the above. *The firm's profits will be higher. c) inflexible a) Kinked-demand curve model 5) Which one of the following is not a feature common to all games? In the scenario above, the market is. A) each firm can act like a monopoly. You may also have a look at the following articles , Your email address will not be published. D) neither is protected by high barriers to entry. xxx\underline{\phantom{\text{xxx}}}xxx. c) price leadership; cartel A) potential entrants entering and making monopoly profit. The number of suppliers in a market defines the market structure. B) the courts. Oligopoly Models: 1. 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. It is assumed that all of the sellers sellidentical or homogenous products. Impure oligopoly - have a differentiated product. 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. *Diseconomies of scale D. 2021. 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. Share with Email, opens mail client Here, they focus on each other and try to exceed customer expectations in every possible way. Companies often merge to ______ monopoly power. B) raise the price of their products. Barriers to entry. c) sales of the largest firms in an industry 10) In the dominant firm model of oligopoly, the dominant firm produces the quantity at which marginal revenue equals

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