b) are few in number a) productive efficiency but not allocative efficiency As a result, each firm obligates to adhere to pre-determined price and quantity/output levels to maximize revenue. 2) In the dominant firm model of oligopoly, the larger firm acts like C) perfectly elastic. A dominant-bank oligopoly confronting a competitive fringe There are two sets of banks: dominant banks and fringe banks. A) Each firm faces a downward-sloping demand curve. a) It could be downward or upward sloping. Increasing returns to scale is a term that describes an industry in which the rate of increase in output is higher than the rate of increase in inputs. Advertising can reduce efficiency by ______. D) its profit will rise by the same percentage. 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. The existence of oligopoly requires that a few firms are able to gain significant market power, preventing other, smaller competitors from entering the market. This has been a Guide to Oligopoly and its definition. A. cutting prices D) entry into the industry of rival firms will have no impact on the profit of the cartel. A Computer Science portal for geeks. 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). A) Dr. Smith advertises no matter what Dr. Jones does. *world trade a. (Enter one word for each blank. c) They achieve allocative efficiency because they produce at minimum average total cost. E) a cartel. In the graph, the price elasticity of demand is ______ below the price of P0. 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. B) interdependence of firms. d) Firms choose strategies at the same time. Mutual interdependence solely means that they base their decisions on how they think their rivals will react. A monopoly occurs when. *The firm's demand curve will shift further to the left. E) entry into the industry of rival firms will raise cartel profit as long as the new firms join the cartel. c) regulated monopoly 8) Which of the following quotes shows a contestable market in the widget industry? What are three models used to study pricing and output by oligopolies? The distinctive feature of an oligopoly is interdependence. 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. a) are always more efficient It is used as one of the strategies to increase the business firm's revenue and increase the market share. Consequently, the output and pricing policies of a particular company can affect market conditions. E) only when there is no Nash equilibrium. Suppose that one of the two firms decided to reduce the price of its product by some amount resulting 20 % increase in its sales. c) may be less desirable because they are not regulated by government to protect consumers C) Parliament. For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly. Impure oligopoly - have a differentiated product. Firms in the industry make price and output decisions with an eye to the decisions and policies of other firms in the industry. C) average variable cost curve is discontinuous. ), Oligopolists often compete through product development and advertising instead of price because ______. C) is; to cheat regardless of the other firm's choice price changes, not production costs, so it can't be b. Which of the following represents the problem with the four-firm concentration ratio? D) increase the amount they produce. a) The same as monopolistic competition Lets identify the oligarchy before identifying the characteristics of an oligopoly. About us. C) Miller has a dominant strategy but Bud does not. Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it. *Prohibit the entry of new rivals, *Reduce uncertainty *increasing sales and output *It enhances competition and reduces monopoly power. 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. Types of Market Structure Economists group industries into four distinct market structures: 1. D) patents, copyrights, barriers to entry, and rules. E) more elastic than the demand just above the price at the kink. C) strategies b) The possibility of price wars diminishes, but profits might be lower. *Large capital investment c) Price war The other two share the rest (20%). c) Firms earn zero economic profits in the long-run. And that is what turns out to be the unique selling proposition (USP) of the respective brands in the oligopolistic industry. Strategic independence. B) both prisoners deny. It is calculated by dividing the change in the costs by the change in quantity. Established firms in the market may take strategic actions to prevent new entries. Keep its price constant and thus increase its market share B. *The game would temporarily move to either cell B or cell C. D) a firm in perfect competition. Answers: 1 Show answers Another question on Social Studies. C) Firms in the cartel will want to raise the price. e) Price leadership model, In the _______ model of oligopoly, firms react to price decreases but ignore price increases by other firms. a) greater than or equal to 40% C) "If only Wally and I could agree on a higher price, we could make more profits." D) zero. Strategic independence. D) the four-firm concentration ratio for the industry is small. d) The percentage of industries that are dominated by a group of four or fewer firms, c) The percentage of total industry sales accounted for by the four largest firms, What term means "cooperation with rivals?" B) assumes marginal cost is constant. *Preemptive pricing C) firms in monopolistic competition. a) Import competition E) rivalry of the participants leads to the worst solution from their point of view. c) it will prevent a price war A) potential entrants entering and making monopoly profit. B) Other firms will enter the industry. C) is; the dominant firm is making an economic profit The key characteristics of an oligopoly market structure include: Few firms : There are only a few firms in the market, which makes it easy for the firms to coordinate their behavior and to reach . a) The possibility of price wars diminishes and profits are maximized. c) Kinked-supply curve model *Increase profits Each optometrist can choose to advertise his service or not. d) their profits and sales will rise The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. Companies often merge to ______ monopoly power. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . In the scenario above, the market is. Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity 11) Which one of the following quotations best describes a dominant firm oligopoly? D) equilibrium quantity will be sensitive to small cost changes but price will not. A) rules e) It could be downward sloping or kinked. Meanwhile, all firms know that their decisions affect other firms sales and profit, hence they necessarily react against those decisions. A) there are fewer than 6 firms in a market a) Dominant strategy It is an essential component of marketing strategy leading to brand recognition and business growth. 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 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? For example, the existing firms might threaten to reduce the price drastically if entry occurs. A) behave competitively. ENGL1190_V0854_2023WI_Communications23.docx. Marginal revenue = Change in total revenue/Change in quantity sold. as the price increases, demand decreases keeping all other things equal. Oligopoly. Oligopoly as a market structure is distinctly different from other market forms. C) Art denies and Bob confesses. B) This game has no Nash equilibrium. These firms are large enough that their quantity influences the price and so impacts their rivals. read more, and marginal revenue is the product price. a) necessary An oligopoly is an industry dominated by a few large firms. I really hope you learned this article. An oligopolistic firm's marginal revenue curve is made up of two segments if ______. A) a Competition Tribunal. Over a long time period, cheating ______ collusive oligopolies A) each firm can act like a monopoly. The distinctive feature of an oligopoly is interdependence. Marilyn They do so through collusion that results in higher prices and fewer production or product choices for customers. D) increase the amount they produce. D) specify how average cost is determined. b. (Pure) Monopoly 3. The presidents friend constructs and sells single family homes. c) The outcomes for all firms are positive. Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. It encourages existing brands to improve product quality and originality by instilling a sense of rivalry. C. La sociedad se encuentra dividida entre capitalistas, terratenientes y trabajadores. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. While AI integration in the medical, legal, and financial sectorsFinancial SectorsThe financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. What are the 4 characteristics of oligopoly? 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 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. Which is the simple form of oligopoly market? Each firm faces a downward-sloping demand curve. 5) According to the kinked demand curve theory of oligopoly, each firm believes that if it raises its price, The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." Oligopoly Models: 1. b) depends on the firm's cost structure The distinctive feature of an oligopoly is interdependence. If the products of the firms are differentiated the degree of interdependence is then weakened. B) of barriers to entry. A duopoly is B) monopolists. a) Firms have no control over their price. b) Collusive pricing model Oligopoly is a market with a few firms and in which a market is highly concentrated. List the three steps followed under the gross profit method of estimating inventory. D) not an oligopoly. 9) In the dominant firm model of oligopoly, the dominant firm faces a d) straight and steep Why Developing Countries Should Focus on International Trade? C) a firm in monopolistic competition. Perfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. E) equilibrium price and quantity will be insensitive to small demand changes. b) it will lower the firm's costs 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. Pure (Perfect) Competition. Also, they rely on free-market forces to earn higher profits than a competitive market. c) It will always be kinked because it is a price maker. Economists identify four types of market structures: (1) perfect competition, (2) pure monopoly, (3) monopolistic competition, and (4) oligopoly. What is the Nash equilibrium? What kind of game is it when firms choose their optimal pricing strategy today without worrying about possible interactions in the future? a) purely competitive market *It eliminates competition among firms. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. The policy implementation process has not taken in to account the life of rural peasants living in vicinity of cities. 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. It is assumed that all of the sellers sellidentical or homogenous products.read more, monopoly, and monopolistic competition. c) kinked-demand 12) Because an oligopoly has a small number of firms Oligopoly refers to a market situation or a type of market organisational in which a few firms control the supply of a commodity. A) Each firm faces a downward-sloping demand curve. b) legal a) Kinked-demand curve model a) They move downward and to the right to a lower operating point on the average-total-cost curve. That is, the firm is myopic or short sighted not to learn from its past mistakes and take d 1 d'1, as if it will not shift. c) kinked C) a perfectly competitive market. Marginal revenue = Change in total revenue/Change in quantity sold. A small number of sellers. When firm X increases its price. 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E) marginal cost. read more curve results in a convex bend, known as kink. C) equilibrium price will be sensitive to small cost changes but quantity will not. Following are the characteristics of oligopoly: Interdependence. *speeding up technological progress Businesses in such a market collaborate to dominate the rest of the players and maximize joint revenue. Consequently, the sales of the other firm will be definitely reduced by the same percentage. E) other firms will not raise theirs. When the number of firms in an oligopolistic industry increases from 3 to 10, it is ______ to collude. e) Firms may sell a differentiated product. Firms in anoligopoly marketfocus on non-price competition and less innovation but ensure their brands are uniquely identifiable. D) the four-firm concentration ratio for the industry is small. *localized markets, *dominant firms Mr. mann's science students were experimenting with speed. b) They try to avoid losses by raising prices in conjunction with rival firms. 0) If the efficient scale of production only allows three firms to supply a market, the market is a. 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. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. 11) Because an oligopoly has a small number of firms, A) each firm can act like a monopoly. It determines the law of demand i.e. B) Firms are profit-maximizers.C) The sales of one firm will not have a significant effect on other firms. 14) A duopoly occurs when ________. a) are less efficient due to competition Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. b) They achieve productive efficiency because their marginal revenue equals marginal cost. What is it called when firms reach a verbal or tacit agreement with rivals about price in a social setting like the golf course? What are the four characteristics of market structure? However, at this price profit of firm B is not maximized. ADVERTISEMENTS: This fact is recognized by all the firms in an oligopolistic industry. B) other firms will lower theirs. Which one of the following observations is correct? See more documents like . If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs *Ownership and control of raw materials A) collusion of the participants leads to the best solution from their point of view. 0. A firm in an oligopolistic market ______. C) the HHI for the industry is small. c) through product development E) Firms set prices. Determinateness of demand curve is a part of law of demand and does not fall in oligopoly. A) "I am producing extra widgets, even though it costs me short-run profits, to stop Wally's Widgets from expanding into my market." *To obtain lower input prices b) The Herfindahl model It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. Which statement is true about oligopolies? D) assumes that competitors will match price cuts and ignore price increases. c) By changing pricing strategies But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. Therefore, necessarily they tend to react. D) neither is protected by high barriers to entry. the students used balls . c) They lose most of their excess-production capability. 3) Which one the following industries is the best example of an oligopoly? A few firms control most of the production and sale of a product. *Cause price wars during business recessions When this structure is in place for an economy, then only a small number of producers, distributors, and sellers interact with the customer base to distribute items. D) products that are slightly different. *It lowers search costs of information for consumers. B) total revenue. Any decision taken by a firm in order to increase its sales would adversely affect the sales and hence profit of the other firms. True or false: Firms in an oligopoly always produce a homogeneous product. . B) marginal cost curve is discontinuous. Either way, Id like to hear from you. *dominant firms Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making. They collude and agree to share the market equally. *To increase control over the product's price Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the e) Its marginal cost curve is made up of two segments, d) Its marginal revenue curve would consist of two segments. *The firm is failing to produce at the profit-maximizing output. C) both have MR curves that lie beneath their demand curves. Business Economics Consider a Cournot oligopoly with n = 2 firms. In a(n) _____ game one firm moves first, committing to a strategy and then the rival firm responds. c) dominant firms The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. A situation where firms meet to fix prices, divide markets, or restrict competition is called ______. $4. In doing so, they reduce production and increase prices, a phenomenon called collusion. *Increase profits C) in a repeated game but not a single-play game. D) if Bob does not change his decision, Jane would like to change hers. Click the card to flip Definition 1 / 84 When there are two market leaders in any industry or service, this is referred to as a duopoly. d) Mutual interdependence. The four-firm concentration ratio is based on the ___. *interindustry competition 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. D) is; the smaller firms cannot become the dominant firm 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. a) low to receive a payout of $15 *To increase control over the product's price Welcome to EconTips, your number one source for all things about economics. B) "I am producing more widgets than Wally and I agreed to in our talk last week." Some of its fundamental characteristics include the existence of a small number of firms, differentiated or homogeneous products, and barriers to entry. 1) A cartel is a group of firms which agree to bc it's similar to monopoly but has the difference of having more firms lol. The characteristics of oligopoly include interdependence, product differentiation, high barriers to entry, uncertainty, price setters. One of theoligopoly characteristicsis the focus of its members on improving the product quality or offering benefits to make their brand unique. Here we discuss how does Oligopoly market work in economics along with its characteristics. b) collusion model Segn Ricardo no es posible que exista equidad en el mercado debido a que: A. After each player chooses his or her best strategy and sees the result, 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. Furthermore, no restrictions apply in such markets, and there is no direct competition. 1) A cartel is a group of firms which agree to A) behave competitively. Then the large firm may consider the other two firms are too small, hence ignore their reactions while taking decisions. d) strategic theory. *Patents, *Preemptive pricing 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. a) They may produce homogeneous or differentiated products. d) greater than or equal to 60%, How can oligopolistic firms influence their profits and the profits of their rivals? 6) According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink, the firm's Principles of Microeconomics Instructor: Sandhya Patlolla Assignment 7 1) In two firm oligopoly, if one firm increases its price, then the other firm can: A. B) both firms comply with the agreement. Which scenario describes a simultaneous game? So when an oligopolist decreases prices to increase output, others follow the path. . 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." B) neither player would be willing to change his or her decision unless the other player also changes his or her decision.