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What are the 4 characteristics of oligopoly? A market is deemed oligopolistic or extremely concentrated when it is shared between a few common companies. d) is always kinked Imperfect or Differentiated Oligopoly: ADVERTISEMENTS: Why do the elements of structure, such as work specialization, formalization, span of control, chain of command, and centralization, have a tendency to change together? For example, the existing firms might threaten to reduce the price drastically if entry occurs. C) the HHI for the industry is small. 14) A duopoly occurs when ________. C) is; to cheat regardless of the other firm's choice d) Dominant firms, What are oligopolists able to do by controlling price through collusion? c) have no rivals c) Dominant firms A dominant-bank oligopoly confronting a competitive fringe There are two sets of banks: dominant banks and fringe banks. d) They do not achieve allocative efficiency because their price exceeds marginal cost. Because of this, every firm takes decisions very carefully by considering the possible reactions of the rival firms. Which of the following is characteristic of oligopoly, but not of monopolistic competition? Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. Demand and cost differences, the number of firms in the industry, and the potential for cheating all represent _____ (one word) to collusion. ENGL1190_V0854_2023WI_Communications23.docx. C) average variable cost curve is discontinuous. 9) If the efficient scale of production only allows three firms to supply a market, the market is a, 10) A cartel is a group of firms that agree to. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. b) increasing monopoly power Oligopolistic firms do which of the following when they change their pricing strategies? An example of a pure oligopoly would be the steel industry, which has only a few producers but who produce exactly the same product. d) vertical a) pricing theory C) there are numerous producers of two goods competing in a competitive market 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 Features: Many and small sellers, so that no one can affect the market 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. d) The firms in the industry are interdependent. Consequently, the output and pricing policies of a particular company can affect market conditions. 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. c) Firms earn zero economic profits in the long-run. B) a monopoly. E) None of the above. b) The possibility of price wars diminishes, but profits might be lower. a) Affect profits and influence the profits of rival firms The number of suppliers in a market defines the market structure. A) all members of the cartel have a strong incentive to abide by the agreed-upon price. 7) Why might only a few firms dominate an oligopolistic industry? as the price increases, demand decreases keeping all other things equal. b. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. 16) The firms Trick and Gear form a cartel to collude to maximize profit. c) costs; uncertainty; increase Examples of oligopolies Car industry - economies of scale have caused mergers so big multinationals dominate the market. *increasing economies of scale, *providing misleading information Also, they rely on free-market forces to earn higher profits than a competitive market. Furthermore, no restrictions apply in such markets, and there is no direct competition. *To decrease monopoly power The profit-maximizing price of firm B is PB(>PA) and the quantity is Xbe. However, at this price profit of firm B is not maximized. 8) Which of the following quotes shows a contestable market in the widget industry? E) Firms set prices. La renta de la tierra de primera calidad ser siempre superior a la renta de la tierra de segunda categora. a) The number of average-sized firms in an industry needed to produce sales equivalent to the four largest firms The more concentrated a market is, the more likely it is to be oligopolistic. OA. attempts to raise $425 million to use to build apartments in a growing area of Tulsa. B) other firms will lower theirs. When two major players dominate a sector, the market becomes a duopolyDuopolyWhen there are two market leaders in any industry or service, this is referred to as a duopoly. c) game theory b) competitively Why is collusion desirable to oligopolistic firms? B) neither player would be willing to change his or her decision unless the other player also changes his or her decision. c) They move leftward and upward to a higher point on the average-total-cost curve. The firms produce differentiated products. 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. *Cause price wars during business recessions Oligopoly. 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. b) potential for mergers and acquisitions a) is needed in Marilyn In third-degree price discrimination happens when customers are segregated by . a) The possibility of price wars diminishes and profits are maximized. E) Dr. Smith does not advertise if Dr. Jones advertises. d) Cost leadership model In these characteristics, manufacturers usually only produce and sell one product. e) It could be downward sloping or kinked. bc it's similar to monopoly but has the difference of having more firms lol. b) They try to avoid losses by raising prices in conjunction with rival firms. D) Consumers will eventually decide not to buy the cartel's output. d) elastic, An oligopoly firm's demand curve will be kinked if ______. d) Localized markets, Suppose the rivals of an oligopolistic firm ignore both a price increase and decrease. c) kinked-demand debt to equity ratio and that it will be reversed whenever the presidents friend wants the 5) Which one of the following characteristics applies to oligopolistic markets? Keep its price constant and thus decrease its market share C. Increase its price and thus increase its market share D. Decrease its price and thus decrease its market share $1. Economists identify four types of market structures: (1) perfect competition, (2) pure monopoly, (3) monopolistic competition, and (4) oligopoly. 0. Oligopoly. a) depends on the actions of rivals to price changes B) of barriers to entry. B) each member will face the temptation to cheat on the cartel price to increase its sales and profit. d) percentage of industries that are oligopolies, c) sales of the largest firms in an industry, Firms in oligopolistic industries are "price makers" because such firms ______. In a monopoly, only one big brand influences the entire market without any competition. a) payoff a) inelastic You'll get a detailed solution from a subject matter expert that helps you learn core concepts. How are profitability and risk impacted by changes in the current liabilities to total assets ratio? For a particular industry there may be a low four-firm concentration ratio since it is measured on a nationwide scale, but there can still be a local oligopoly. is the demand curve for taxi rides in a town, and, 14) Refer to Figure 14.1.1. 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 can act like a monopoly. d) are more efficient because cartels and collusion is always successful Such companies have complete control of the market, earning high profits and gains in a specific sector or service. they set up a 1 meter (100 cm) track. Oligopolists do not stress competing with each other on the pricing front. 8) A weakness of the kinked demand curve theory of oligopoly is that it does not Many firms b. Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. D) payoffs Here we discuss how does Oligopoly market work in economics along with its characteristics. 9) Which isnota characteristic of oligopoly? 4. ), Oligopolists often compete through product development and advertising instead of price because ______. An oligopoly is a market state where there is a limited amount of competition available for consumers to consider. Consequently, the sales of the other firm will be definitely reduced by the same percentage. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. b) Collusive pricing model d) game theory. To further understand market modules follow the below topics. ), Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? A) This game has no dominant strategies. 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. *Patents, Which are reasons that that firms merge? Oligopolists offer comparable products or services, so they control prices rather than the market. 5) According to the kinked demand curve theory of oligopoly, each firm believes that if it raises its price, It is assumed that all of the sellers sellidentical or homogenous products.read more, monopoly, and monopolistic competition. E) other firms will not raise theirs. D. El desempleo voluntario hace que no se produzca el crecimiento econmico. 2) In the dominant firm model of oligopoly, the larger firm acts like This represents what kind of problem with the four-firm concentration ratio? 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? a) L-shaped b) through pricing *It lowers search costs of information for consumers. As a result, monopolists produce less, at a higher average cost, and charge a higher price than would a combination of firms in a perfectly competitive industry. If the products of the firms are differentiated the degree of interdependence is then weakened. D) increase the amount they produce. b) high to receive a payout of $15 It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. As in an oligopoly market, the decision of one firm influences the process and working of another firm. CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. There are just several sellers who control all or most of the sales in the industry. Mutual interdependence among the firms in decision making is the essential feature of the oligopolistic market. Why Developing Countries Should Focus on International Trade? *To increase control over the product's price read more, and marginal revenue is the product price. 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. You are free to use this image on your website, templates, etc., Please provide us with an attribution link. D) the four-firm concentration ratio for the industry is small. Oligopolies are typically composed of a few large firms. C) the same as a monopoly. *It eliminates competition among firms. 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. C) Firms in the cartel will want to raise the price. C) Miller has a dominant strategy but Bud does not. read more curve results in a convex bend, known as kink. The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. Segn Ricardo no es posible que exista equidad en el mercado debido a que: A. In doing so, they reduce production and increase prices, a phenomenon called collusion. Strategic independence. If one firm is large enough to account, which is that 80% of sales in the industry. Which of the following is NOT a characteristic of an oligopoly? Barriers to entry. Which statement is true about oligopolies? B) the firms may legally form a cartel. A) a firm in an oligopoly market. E) All of the above. 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. E) the firms are interdependent. C) both have MR curves that lie beneath their demand curves. what are the 5 characteristics of an oligopoly? 8) 8)Which is not a characteristic of oligopoly? Social Studies, 22.06.2019 00:00. d) By updating manufacturing equipment, What is the four-firm concentration ratio? *The game would eventually end in the Nash equilibrium (cell A). a. 300 laborers were employed at the plant that month. This has been a Guide to Oligopoly and its definition. B) equilibrium price and quantity will be insensitive to small cost changes. Oligopolies are typically composed of a few large firms. If this occurs, then the firm's demand curve will look ______. as the price increases, demand decreases keeping all other things equal.read more shifts. Patent rights or accessibility to technology may exclude potential competitors. *Large capital investment *Reduce uncertainty Oligopolies are typically composed of a few large firms. An oligopolistic firm's marginal revenue curve is made up of two segments if ______. d) The advertising model, To reduce uncertainty or increase profits, oligopolists may change their prices ______. Oligopolyis a market structure D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. *Reduce inputs used in production If a firm assumes that its rivals will match all price changes, but the firm's rivals actually charge a lower price what are the potential consequences? Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. C) Parliament. c) product development and advertising are relatively inexpensive East Asian regimes tend to have similar characteristics First they are orien. Thus, each firm gains a considerable market share with minimal potential profits. D) A and B. The distinctive feature of an oligopoly is interdependence. C) one prisoner has no chance to be acquitted since there is no other prisoner to support his testimony. b) price leadership; collusion b) pure monopoly So when an oligopolist decreases prices to increase output, others follow the path. e) Firms may sell a differentiated product. c) threatens *Preemptive pricing C) "Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company." d) Mutual interdependence. d) through advertising E) a competitive market produces two goods. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. D) Bud has a dominant strategy but Miller does not. Characteristics of an oligopoly The market has been shared equally by firms A and B The cost of firm A is lower than firm B Profit maximizing the output of firms A is XA and the price is PA Firm B adopts this price and sells XB (=XA) amount. The concentration ratio measures the market share of the. Greater the number of firms, the higher the degree of interdependence. b) depends on the firm's cost structure D) potential entrants not entering the market. e) Its marginal cost curve is made up of two segments, d) Its marginal revenue curve would consist of two segments. D) entry into the industry of rival firms will have no impact on the profit of the cartel. Oligopoly as a market structure is distinctly different from other market forms. 13) A dominant firm oligopoly might be one for which the Herfindahl-Hirschman Index is A) specify the technology of production. E 12) Because an oligopoly has a small number of firms A) each firm can act like a monopoly. c) The outcomes for all firms are positive. Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making. Production Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. read more rather than lower prices to gain profits and market share. 7) The kinked demand curve theory of oligopoly predicts that d) Firms choose strategies at the same time. E) more elastic than the demand just above the price at the kink. d) their profits and sales will rise c) price leadership; cartel The labor productivity at this plant is known to have been 0.100.100.10 vans per labor-hour during that month. D. Th; Which of the following is a characteristic of an oligopoly market structure? What are the 4 characteristics of oligopoly? 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. O B. It determines the law of demand i.e. 11) Which one of the following quotations best describes a dominant firm oligopoly? A) in a single-play game or a repeated game. c) The possibility of price wars increases, but profits are maximized. The value denotesthe marginalrevenue gained. 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. b) Its demand curve is downward-sloping C) the HHI for the industry is small. If one of the firms cheats on this agreement, what will happen? Lets identify the oligarchy before identifying the characteristics of an oligopoly. E) a cartel. In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. C. Some market power. O D. Some barriers to entry. However, DTR does not intend to build any single family homes. B) the firms may legally form a cartel. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. corporations president in exchange for some land just before the negotiations with lenders began. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the The study of how people behave in strategic situations is called _____ theory. The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products. Pure (Perfect) Competition 2. d) easier. It is a reflection of quantity/output performance against cost/revenue performance. 1. c) competition A) collusion of the participants leads to the best solution from their point of view. D) is; the smaller firms cannot become the dominant firm What kind of problem does this represent with the four-firm concentration ratio? always one step ahead. b) Strategies are chosen for a single time period. 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. *Increase profits Oligopolists do not compete with each other. Oligopoly is said to prevail when there are few firms or sellers in the market producing or selling a product. The characteristics of an oligopoly market or oligopolistic strategy are mentioned below: Interdependence . E) entry into the industry of rival firms will raise cartel profit as long as the new firms join the cartel. C) The sales of one firm will not have a significant effect on other firms. Barriers to entry into an oligopoly most resemble those of a ______. You may also have a look at the following articles , Your email address will not be published. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________.