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 so, then the firm's demand curve will be ______. *The firm's demand curve will shift further to the right. a) Cartel Oligopoly Models: 1. d) Cost leadership model The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________. It is used as one of the strategies to increase the business firm's revenue and increase the market share. c) inflexible Raised barriers to entry, price-making power, non-price competition, the interdependence of firms, and product differentiation are alloligopoly characteristics. *world trade The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. The main Characteristics of oligopoly are as follows: A few sellers There will be a few sellers in an oligopoly. The number of suppliers in a market defines the market structure. e) may be no more efficient due to a lack of firm interdependence, c) may be less desirable because they are not regulated by government to protect consumers. C) the HHI for the industry is small. 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 first firm to move in a sequential game has an advantage by establishing a ____ _____ that is favorable to them. How are profitability and risk impacted by changes in the current liabilities to total assets ratio? *Patents, *Preemptive pricing A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ______. d) price changes are often difficult to match 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. Oligopolistic firms do which of the following when they change their pricing strategies? Greater the number of firms, the higher the degree of interdependence. D) neither is protected by high barriers to entry. b) interindustry competition B) a market where two firms compete for profit and market share. C) perfectly elastic. B) revenues, elasticity, profit, and payoffs. It encompasses several industries, including banking and investment, consumer finance, mortgage, money markets, real estate, insurance, retail, etc. a. small number of firms b. has some pricing power c. the firms are interdependent d. the good produced may be unique or not e. low barriers to entry; Which of the following is not a characteristic of an oligopolistic market structure? b) are less efficient because they are often regulated by the government (Enter one word per blank. A few firms control most of the production and sale of a product. *To decrease monopoly power D) not an oligopoly. 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. D) Bud has a dominant strategy but Miller does not. C. Some market power. It encourages existing brands to improve product quality and originality by instilling a sense of rivalry. E) marginal revenue curve is upward sloping. c) The possibility of price wars increases, but profits are maximized. A) the government will impose price controls. 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. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. 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. b) Strategies are chosen for a single time period. C) the good produced in the market has been deemed a necessity A) kinked demand curve. D) if Bob does not change his decision, Jane would like to change hers. 11) Because an oligopoly has a small number of firms. An oligopoly (from Greek , oligos "few" and , polein "to sell") is a market form wherein a market or industry is dominated by a small group of large sellers (oligopolists). $15. E) marginal cost. D) marginal revenue curve is discontinuous. B) "I am producing more widgets than Wally and I agreed to in our talk last week." Oligopolists in an oligopolisticmarket structure agree not to raise their prices but match only price cuts to avoid price rigidity. A market is considered to be a(n) ______ when the largest four firms in an industry control more than 40% or more of the market. D)There is more than one firm in the industry. b) collusion model b) They achieve productive efficiency because their marginal revenue equals marginal cost. A) suggests that price will remain constant even with fluctuations in demand. Over a long time period, cheating ______ collusive oligopolies A) Each firm faces a downward-sloping demand curve. 9) In the dominant firm model of oligopoly, the dominant firm faces a a) its rivals collude b) The possibility of price wars diminishes, but profits might be lower. Oligopoly is an important form of imperfect competition. It thus limits the competition to only those already in the group. A monopoly occurs when. Oligopolists do not compete with each other. Business Economics Consider a Cournot oligopoly with n = 2 firms. However, at this price profit of firm B is not maximized. *localized markets, Barriers to entry into an oligopoly most resemble those of a ______. What is it called when firms reach a verbal or tacit agreement with rivals about price in a social setting like the golf course? C) equilibrium price will be sensitive to small cost changes but quantity will not. The control of oligopolists over specialized inputs, such as resources, price, and production, makes it difficult for a new firm to survive. E) none of the above. B) both firms comply with the agreement. So when an oligopolist decreases prices to increase output, others follow the path. a) price leadership d) through advertising, Firms have a desire to cheat on a collusive agreement because ______. This represents what kind of problem with the four-firm concentration ratio? B) the firms may legally form a cartel. C) average total cost. *Preemptive pricing Firms in anoligopoly marketfocus on non-price competition and less innovation but ensure their brands are uniquely identifiable. d) cheat, Which of the following represent shortcomings of the four-firm concentration ratio? A Computer Science portal for geeks. 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 _____. 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. d) can set its price and output to maximize profits. d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition Firm 1 cost function is TC (9) = 20 + 12q + q, while firm 2 cost function is TC (9) = 50 +8q2 + q . a) often *Patents, Which are reasons that that firms merge? Oligopolies are typically composed of a few large firms. 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. 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) low to receive a payout of $8. Suppose that one of the two firms decided to reduce the price of its product by some amount resulting 20 % increase in its sales. A small number of sellers. This way, Samsung and Nokia ensure non-price competition by enhancing core capabilities to build a loyal customer base. b) pure monopoly C. The choices made by one firm have a significant effect on other firms. In the credit card industry, for example, Visa and MasterCard have a duopoly. c) through product development Which of the following represents the problem with the four-firm concentration ratio? ratio. B) monopolists. Strategic independence. a) Import competition E) is; to comply when the other firm cheats and to cheat when the other firm complies. The firms produce differentiated products. 300 laborers were employed at the plant that month. C) the firms keep profits and prices so low that no rivals are . A) Each firm has an incentive to collude. . If this occurs, then the firm's demand curve will look ______. An oligopoly is a market structure that involves few producers and suppliers (www.oecd.org). Which of the five do you feel is the most important? d) greater than or equal to 60%, How can oligopolistic firms influence their profits and the profits of their rivals? B) of barriers to entry. b) demand theory Marginal revenue = Change in total revenue/Change in quantity sold. Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. D) the one producer of two goods sells the goods in a monopoly market 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 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. *The game would temporarily move to either cell B or cell C. 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. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. 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. The existence of oligopoly requires that a few firms are able to gain significant market power, preventing other, smaller competitors from entering the market. ENGL1190_V0854_2023WI_Communications23.docx. c) its rivals ignore price increases and price decreases a) low to receive a payout of $15 Then the large firm may consider the other two firms are too small, hence ignore their reactions while taking decisions. 9) Which is not a characteristic of oligopoly? They do so through collusion that results in higher prices and fewer production or product choices for customers. When members of an oligopoly react to price changes by a ____ _____ dominant firm, the model is most applicable. C) potential entrants entering and making zero economic profit. c) through collusion E) a cartel. A small number of sellers. The value denotesthe marginalrevenue gained. d) have interdependent pricing. 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. A) 0. Barriers to entry. b) Interindustry competition *speeding up technological progress E) both are price takers. *It lowers search costs of information for consumers. 7) The kinked demand curve theory of oligopoly predicts that a) increasing firm profits E) more elastic than the demand just above the price at the kink. b) The number of employees in an industry who ever have or are currently working for one of the four largest firms 3) Canada's anti-combine law is enforced by 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. It is difficult to enter an oligopoly industry and compete as a small start-up company. A) a market where three dominant firms collude to decide the profit-maximizing price. a) They may produce homogeneous or differentiated products. Advertising benefits society by ______. C) perfectly elastic demand. Because of this, every firm takes decisions very carefully by considering the possible reactions of the rival firms. A) all members of the cartel have a strong incentive to abide by the agreed-upon price. Instead, they try different approaches, such as rewarding customers for their loyalty, differentiating their product offerings, providing sales promotion schemes, acting as sponsors, etc. a) kinked and steep 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. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." Is Microsoft an oligopoly Do you want to know Click Here. 12) Because an oligopoly has a small number of firms D) monopolistic competition. 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. Share with Email, opens mail client . Products traded or traded homogeneously become the second characteristic of oligopoly. As in an oligopoly market, the decision of one firm influences the process and working of another firm. They do it strategically so they do not lose their customers in what could be a price war. 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. a) necessary What are the 4 characteristics of oligopoly? characterized by the presence of a few large firms who produces a) Affect profits and influence the profits of rival firms Oligopoly refers to a market situation or a type of market organisational in which a few firms control the supply of a commodity. But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. In the credit card industry, for example, Visa and MasterCard have a duopoly.read more. Collusion becomes more difficult as the number of firms ____. believes that DTRs debt to equity ratio of 1.6 is probably the minimum that lenders will accept. Firms in the industry make price and output decisions with an eye to the decisions and policies of other firms in the industry. 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." C) in a repeated game but not a single-play game. B) rivalry among a large number of rivals leads to lower overall profit. c) Affect costs and influence the supply of rival firms c) dominant firms D) Dr. Smith advertises only if Dr. Jones advertises. Which is the simple form of oligopoly market? c) harder Oligopoly is a market structure characterized by a few firms. E) specify what happens if costs change. E) Each firm has an incentive to cheat. Strategic independence. Nokia, however, offers Android phones with the same features and almost similar prices. The most important model of oligopoly is the Cournot model or the model of quantity competition. D) All of the above. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. (Pure) Monopoly 3. a) Import competition The distinctive feature of an oligopoly is interdependence. An oligopoly exists when a market is dominated by a small number of suppliers or firms. a) It could be downward or upward sloping. 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? Oligopoly. Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the The financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. E) a market with two distinct products. *mutual interdependence c) is always downward sloping 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) specify the technology of production. c) Nash equilibrium The marginal revenue formula computesthe change in total revenue with more goods and units sold." c) Dominant firms C) Firms in the cartel will want to raise the price. c) game theory e) Its marginal cost curve is made up of two segments, d) Its marginal revenue curve would consist of two segments. Answers: 1 Show answers Another question on Social Studies. C) is; the dominant firm is making an economic profit bc it's similar to monopoly but has the difference of having more firms lol. It is calculated by dividing the change in the costs by the change in quantity. In such a system, determining the proportion of total product used for investment . Each firm is so large that its actions affect market conditions. Answer: An oligopoly is an industry which is dominated by a few firms. c) Dominant firms The land is in an area zoned only for d) Oligopolistic collusion, Compared to monopolies, oligopolies ______. A) there are fewer than 6 firms in a market $6. The amount of time (in seconds) needed to complete a critical task on an assembly line was measured for a sample of 50 assemblies. Features: Many and small sellers, so that no one can affect the market E) none of the above. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. 6) Wal-Mart follows the kinked demand curve model of oligopoly. Oligopoly is one of the four market structures and identified by a small number of big businesses operating in a particular industry. e) through cartels, c) through product development b) Affect profits without influencing the profits of rival firms Therefore, necessarily they tend to react. 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. *It enhances competition and reduces monopoly power. OA. Mutual interdependence among the firms in decision making is the essential feature of the oligopolistic market. When there are two market leaders in any industry or service, this is referred to as a duopoly. Firms are profit-maximizers. B) assumes marginal cost is constant. a) The number of average-sized firms in an industry needed to produce sales equivalent to the four largest firms Your email address will not be published. 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]. 1) A cartel is a group of firms which agree to Marketers highlight the distinguishing features in the product commonly through packaging or a good design, which helps communicate the benefitting factors to the shoppers.read more. as the price increases, demand decreases keeping all other things equal.read more shifts. 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) the firms are interdependent. If this game is nonrepeated, the Nash equilibrium is A) both firms cheat on the agreement. What is oligopoly and its characteristics? E) 10,000. Cost of firm A is lower than firm B Profit maximizing price and quantity of firm A is PA and XA respectively. Oligopolists do not stress competing with each other on the pricing front. c) Its marginal cost curve is made up of two segments 3) The Nash equilibrium for a sequential game in a contestable market with locked-in first stage prices results in E) a cartel. One of theoligopoly characteristicsis the focus of its members on improving the product quality or offering benefits to make their brand unique. e) straight *world trade c) Blue jean designer 13) A dominant firm oligopoly might be one for which the Herfindahl-Hirschman Index is *It lowers search costs of information for consumers. a) L-shaped 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. Here, they focus on each other and try to exceed customer expectations in every possible way. a) its rivals do not respond to either a price cut or price increase b) They try to avoid losses by raising prices in conjunction with rival firms. 8) Firm X is competing in an oligopolistic industry. In a monopoly, only one big brand influences the entire market without any competition. E) Firms set prices. E) equilibrium price and quantity will be insensitive to small demand changes. 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. Also, they rely on free-market forces to earn higher profits than a competitive market. Four characteristics of an oligopoly industry are: Few sellers. B) other firms will lower theirs. Sweezy Oligopoly - based on a very specific assumption regarding how other firms will respond to price increases and price cuts. d) is always kinked Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. 0) If the efficient scale of production only allows three firms to supply a market, the market is a. Demand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. d) cost leadership. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. Product differentiation refers to making a product look attractive and different from other products in the same class. The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. c) product development and advertising are relatively inexpensive 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. How oligopolists react to the price change by one firm can be best understood with the downward-sloping Kinked demand curve. 41) Refer to Table 15.3.12. b) By increasing recruiting expenses It is the most important feature of an oligopolistic market. A) collusion of the participants leads to the best solution from their point of view. What happens to oligopolistic firms when a recession occurs? Save my name, email, and website in this browser for the next time I comment. Which statement is true about oligopolies? price changes, not production costs, so it can't be b. An oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence. 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. c) its rivals match a price increase but ignore a price cut Which of the following is not a characteristic of an oligopoly? A) This game has no dominant strategies. A) "Gas prices in this town always go up and down together." *To increase control over the product's price Marginal revenue = Change in total revenue/Change in quantity sold. 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. e) Firms may sell a differentiated product. In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. C) there are numerous producers of two goods competing in a competitive market C) average variable cost curve is discontinuous. View full document. Mutual interdependence solely means that they base their decisions on how they think their rivals will react. The core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. Oligopoly as a market structure is distinctly different from other market forms. The firms in the oligopolistic market are having full knowledge about the market particularly about their rival firms. Each firm is so large that its actions affect market conditions. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. d) They do not achieve allocative efficiency because their price exceeds marginal cost. e) straight. a) By decreasing total suppliers East Asian regimes tend to have similar characteristics First they are orien. a) The possibility of price wars diminishes and profits are maximized. (Figure) summarizes the characteristics of each of these market structures. 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. 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