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) There is more than one firm in the industry. 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. An oligopoly is an industry dominated by a few large firms (Few sellers supplying, many buyers). B) rivalry among a large number of rivals leads to lower overall profit. What are the 4 characteristics of oligopoly? Its main characteristics are discussed as follows: 1. d) price changes are often difficult to match C. The choices made by one firm have a significant effect on other firms. 2. B) a monopoly. 1. They do it strategically so they do not lose their customers in what could be a price war. a) The same as monopolistic competition *dominant firms E 12) Because an oligopoly has a small number of firms A) each firm can act like a monopoly. That means higher the price, lower the demand. A study based on over 9,0009,0009,000 U. S. residents ADVERTISEMENTS: This fact is recognized by all the firms in an oligopolistic industry. c) Localized markets B) Other firms will enter the industry. d) By updating manufacturing equipment, What is the four-firm concentration ratio? That means higher the price, lower the demand. *Increase profits You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. It is calculated by dividing the change in the costs by the change in quantity.read more is the cost of productionCost Of ProductionProduction Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. B) Dr. Smith does not advertise no matter what Dr. Jones does. 41) Refer to Table 15.3.12. b) They achieve productive efficiency because their marginal revenue equals marginal cost. A small number of sellers. 6) According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink, the firm's b) its rivals match price increases and price decreases d) They do not achieve allocative efficiency because their price exceeds marginal cost. A) the government will impose price controls. 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. Oligopoly. 16) The firms Trick and Gear form a cartel to collude to maximize profit. *To increase control over the product's price B) monopolists. *increasing economies of scale, *providing misleading information C) a firm in monopolistic competition. The financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. List the three steps followed under the gross profit method of estimating inventory. 1) A cartel is a group of firms which agree to *The firm's demand curve will shift further to the left. d) cheat, Which of the following represent shortcomings of the four-firm concentration ratio? 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While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. An oligopoly is a market structure where a few large firms collude and dominate a particular market segment. Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. E)Firms are profit -maximizers. *The firm's demand curve will shift further to the left. *world trade B) both can earn an economic profit in the long run. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . D) the four-firm concentration ratio for the industry is small. e) increasing search time. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. B) other firms will lower theirs. d) does not influence. However, at this price profit of firm B is not maximized. 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. 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. d) through advertising b) potential for mergers and acquisitions E) Bud and Miller each have a dominant strategy. But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making. C) perfectly elastic. *price elasticity of demand c) through product development d) Interindustry competition, Which are barriers to entry in both monopolies and oligopolies? 36) Refer to Table 15.3.10. A) Strategic Independence a) Firms have no control over their price. Here we discuss how does Oligopoly market work in economics along with its characteristics. e) straight So when an oligopolist decreases prices to increase output, others follow the path. c) regulated monopoly c) threatens *It lowers search costs of information for consumers. 7) The kinked demand curve theory of oligopoly predicts that d) their profits and sales will rise. E) Firms set prices. Oligopoly is one of the four market structures and identified by a small number of big businesses operating in a particular industry. c) They lose most of their excess-production capability. 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]. d) their profits and sales will rise 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. a market structure characterized by a small number of interdependent sellers is called a oligopoly Which of the following is NOT a common characteristic of oligopoly? D) Consumers will eventually decide not to buy the cartel's output. E) cheat on each other. d) have interdependent pricing. Marilyn ENGL1190_V0854_2023WI_Communications23.docx. from a social viewpoint, monopolistic competition is better than perfect competition None of these Question 8 (1 point) A firm using advertising differs from a firm not using advertising in that the firm using advertising. *The game would eventually end in the Nash equilibrium (cell B or C). D) is not; to comply when the other firm complies and to cheat when the other firm cheats View full document. at least $10 million. B) a market where two firms compete for profit and market share. what are the 5 characteristics of an oligopoly? 4. A)Each firm faces a downward -sloping demand curve. What is the characteristics of oligopoly? E) a cartel. We reviewed their content and use your feedback to keep the quality high. 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) their prices will be unchanged Marginal revenue = Change in total revenue/Change in quantity sold. D) There is more than one firm in the industry. d) Dominant firms, What are oligopolists able to do by controlling price through collusion? It is assumed that all of the sellers sellidentical or homogenous products.read more, monopoly, and monopolistic competition. Oligopolists offer comparable products or services, so they control prices rather than the market. Why Developing Countries Should Focus on International Trade? If one of the firms cheats on this agreement, what will happen? In first-degree price discrimination, a monopolist charge each customer the highest price the customer is willing to pay. C) Art denies and Bob confesses. a) Affect profits and influence the profits of rival firms a) payoff d) are more efficient because cartels and collusion is always successful 11) Once a cartel determines the profit-maximizing price, e) through cartels, c) through product development A. firms have no control over their price B. firms may sell a differentiated product C. firms have market power D. firms may sell a standardized product E. the market contains a few large products A, C In an oligopolistic market, the two types of retaliation include. 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. read more, and marginal revenue is the product price. In the scenario above, the market is. Pure or Perfect Oligopoly: If the firms produce homogeneous products, then it is called pure or perfect oligopoly. B)Firms set prices. a) over collusion It is calculated by dividing the change in the costs by the change in quantity. *Large capital investment 3) Which one the following industries is the best example of an oligopoly? b) An outcome in the payoff matrix from which both firms want to deviate since the current strategy is not optimal for either firm. b) The possibility of price wars diminishes, but profits might be lower. B) raise the price of their products. E) None of the above. A 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. 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. A) a market where three dominant firms collude to decide the profit-maximizing price. 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. (Enter one word for each blank. D) perfectly inelastic. a) Import competition The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. Firm A and Firm B are the only producers of soap powder. $1. Thus, the land is worth The marginal revenue formula computesthe change in total revenue with more goods and units sold." d) ow to receive a payout of $12 Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the 5) Which one of the following characteristics applies to oligopolistic markets? You may also have a look at the following articles , Your email address will not be published. Features: Many and small sellers, so that no one can affect the market Collusion becomes more difficult as the number of firms ____. 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. b) legal b) Affect profits without influencing the profits of rival firms Any change in either of them will affect the quantity/output sold by a producer. Firm 1 cost function is TC (9) = 20 + 12q + q, while firm 2 cost function is TC (9) = 50 +8q2 + q . Hence, undoubtedly it will react to the price reduction decision. E) None of the above. CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. a) are always more efficient Question: Which of the following is NOT a characteristic of an oligopoly? 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. D) in neither a repeated game nor a single-play game. B) marginal cost curve is discontinuous. The core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. b) Firms may sell a homogeneous product. C) the HHI for the industry is small. b) Lower prices, but greater output An oligopoly is a market structure that involves few producers and suppliers (www.oecd.org). Oligopoly refers to a market situation or a type of market organisational in which a few firms control the supply of a commodity. b) are less efficient because they are often regulated by the government Share with Email, opens mail client The characteristics of oligopoly include interdependence, product differentiation, high barriers to entry, uncertainty, price setters. The distinctive feature of an oligopoly is interdependence. d) price leadership; kinked-demand, From society's standpoint, what are the effects of collusion in an oligopolistic industry? Instead, they try different approaches, such as rewarding customers for their loyalty, differentiating their product offerings, providing sales promotion schemes, acting as sponsors, etc. Companies often merge to ______ monopoly power. Pure oligopoly - have a homogenous product. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. e) It could be downward sloping or kinked. a) Firms have no control over their price. Advertising benefits society by ______. They do so through collusion that results in higher prices and fewer production or product choices for customers. A) a firm in an oligopoly market. For example, when a government grants a patent for an invention to one firm, it may create a monopoly. d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition Which is the simple form of oligopoly market? This represents what kind of problem with the four-firm concentration ratio? a) its rivals do not respond to either a price cut or price increase What are the 4 characteristics of oligopoly? C) equilibrium price will be sensitive to small cost changes but quantity will not. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. In a(n) _____ game one firm moves first, committing to a strategy and then the rival firm responds. Pure because the only source of market power is lack of competition. c) The percentage of total industry sales accounted for by the four largest firms c) price leadership 0. D) increase the amount they produce. c) competition E) 10,000. c) A more efficient industry C) The sales of one firm will not have a significant effect on other firms. b. Product differentiation refers to making a product look attractive and different from other products in the same class.