D) All of the above. d) The market contains a few large producers. The value denotesthe marginalrevenue gained. (Figure) summarizes the characteristics of each of these market structures. After each player chooses his or her best strategy and sees the result, 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. Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. b) price leadership; collusion C) independence of firms. The distinctive feature of an oligopoly is interdependence. C)The sales of one firm will not have a significant effect on other firms. 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. 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. 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. *The firm's profits will be lower. If so, then the firm's demand curve will be ______. c) Dominant firms 16) The firms Trick and Gear form a cartel to collude to maximize profit. 8) Firm X is competing in an oligopolistic industry. B) both prisoners deny. b) its rivals match price increases and price decreases A) suggests that price will remain constant even with fluctuations in demand. ratio. Oligopolists offer comparable products or services, so they control prices rather than the market. 12) Because an oligopoly has a small number of firms from chapter 12 ^-^, What is the only stable outcome in a payoff matrix? It is difficult to enter an oligopoly industry and compete as a small start-up company. 2) In the dominant firm model of oligopoly, the larger firm acts like c) through product development B) the firms may legally form a cartel. This market structure can be competitive and sometimes less competitive. When firm X increases its price. *The firm is failing to produce at the profit-maximizing output. What are the 4 characteristics of oligopoly? D) "I have been spending extra on research and development of my new two-way widget." Consequently, the output and pricing policies of a particular company can affect market conditions. characterized by the presence of a few large firms who produces *providing misleading information B) each member will face the temptation to cheat on the cartel price to increase its sales and profit. A) is; to comply regardless of the other firm's choice a) The number of average-sized firms in an industry needed to produce sales equivalent to the four largest firms e) through cartels, c) through product development . b) demand; losses; increase However, firm B follows the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. The payoffs in the table are the economic profit made by Bud and Miller. D. 2021. Which statement is true about oligopolies? Oligopoly. 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. E) Bud and Miller each have a dominant strategy. *To decrease monopoly power D) specify how average cost is determined. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. c) Price war Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. *interindustry competition A) there are only two producers of a particular good competing in the same market C. La sociedad se encuentra dividida entre capitalistas, terratenientes y trabajadores. A firm in an oligopolistic market ______. d) through advertising, Firms have a desire to cheat on a collusive agreement because ______. a) low to receive a payout of $15 This represents what kind of problem with the four-firm concentration ratio? A small number of sellers. Four characteristics of an oligopoly industry are: Few sellers. Their differences can range from. Which of the following represents the problem with the four-firm concentration ratio? They are 11) Because an oligopoly has a small number of firms, A) each firm can act like a monopoly. *It enhances competition and reduces monopoly power. C) rules, strategies, profit, and outcome. E) both are price takers. So when an oligopolist decreases prices to increase output, others follow the path. Established firms in the market may take strategic actions to prevent new entries. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . a) payoff 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. d) is always kinked d) strategic theory. Answers: 1 Show answers Another question on Social Studies. E) more elastic than the demand just above the price at the kink. 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. Which of the following is not a characteristic of an oligopoly? A. read more, and marginal revenue is the product price. B) a market where two firms compete for profit and market share. . D) There is more than one firm in the industry. *manipulating consumer preferences C) lower the price of their products. Short run equilibrium in monopolyPerfect Competition: Definition, Graphs, short run, long runTop 5 characteristics of an oligopolyMonopoly Price discrimination: Types, Degrees, Graphs, ExamplesDifferent Types of Monopolies| 7 TypesMonopolistic competition assumptionsMonopolistic Competition Equilibrium| Long-run| Short-runMonopolistic Competition and Economic Efficiency. C) "Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company." B) in a single-play game but not a repeated game. And rest of the businesses or minor players follow the same. 41) Refer to Table 15.3.12. *To increase economies of scale, *To increase market share Which of the following is NOT a characteristic of an oligopoly? C) The sales of one firm will not have a significant effect on other firms. A) Each firm faces a downward-sloping demand curve. ECO-FINALS_LESSON-1 - Read online for free. An oligopoly is a market structure where a few large firms collude and dominate a particular market segment. 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. b) Localized markets Economies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. Each optometrist can choose to advertise his service or not. b) Collusive pricing model 26) Refer to Table 15.3.4. c) is always downward sloping A market is deemed oligopolistic or extremely concentrated when it is shared between a few common companies. 1. a) Firms have no control over their price. Which of the following is not a characteristic of oligopoly? b) Interindustry competition at least $10 million. Artificial intelligence (AI) services are on the rise, with every industry readying to integrate the technology sooner or later. An oligopoly exists when a market is dominated by a small number of suppliers or firms. The amount of time (in seconds) needed to complete a critical task on an assembly line was measured for a sample of 50 assemblies. 5) Which one of the following is not a feature common to all games? 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. What are the 4 characteristics of oligopoly? C. Some market power. *interindustry competition Oligopolistic behavior implies that oligopolists prefer competition ______. Over a long time period, cheating ______ collusive oligopolies 6. Examples of oligopolies Car industry - economies of scale have caused mergers so big multinationals dominate the market. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. Based on the figure, if one firm cheats on the collusive agreement it can increase its payoff by *To increase control over the product's price B) Firms are profit-maximizers.C) The sales of one firm will not have a significant effect on other firms. And that is what turns out to be the unique selling proposition (USP) of the respective brands in the oligopolistic industry. B) both can earn an economic profit in the long run. Barriers to entry. This is different compared to the perfectly competitive market and the monopolistic market that consist of a large number of sellers whereas there is only one sole seller in the monopoly market. ENGL1190_V0854_2023WI_Communications23.docx. Prisoners' dilemma describes a case where Raised barriers to entry, price-making power, non-price competition, the interdependence of firms, and product differentiation are alloligopoly characteristics. A) oligopolists. C) firms in monopolistic competition. *speeding up technological progress Use the figure below to answer the following question. Oligopoly Models: 1. d) ow to receive a payout of $12 Consequently, each firm must condition its behavior on the behavior of the other firms. Given the emergence and expected evolution of AI-driven services in various niches, it is likely that there will be a highly concentrated market devoted explicitly to the AI needs of consumers. 1) A cartel is a group of firms which agree to A) behave competitively. 9) Which is not a characteristic of oligopoly? 11) Which one of the following quotations best describes a dominant firm oligopoly? Pure oligopoly - have a homogenous product. a) There are a few large firms that make up the industry. D) the four-firm concentration ratio for the industry is small. 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. The study of how people behave in strategic situations is called _____ theory. b) Its demand curve is downward-sloping a) inelastic Therefore, necessarily they tend to react. e) Firms may sell a differentiated product. B)Firms set prices. a) greater than or equal to 40% 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. D) in neither a repeated game nor a single-play game. c) By changing pricing strategies a) necessary E) only when there is no Nash equilibrium. A) costs, prices, profit, and strategies. a) gentleman's agreement c) They lose most of their excess-production capability. *increasing economies of scale, *providing misleading information Here we discuss how does Oligopoly market work in economics along with its characteristics. B) monopolists. d) can set its price and output to maximize profits. b) Lower prices, but greater output b) depends on the firm's cost structure Either way, Id like to hear from you. E) Firms set prices. This has been a Guide to Oligopoly and its definition. C) "If only Wally and I could agree on a higher price, we could make more profits." E) other firms will not raise theirs. a) They do not achieve allocative efficiency because their average total cost exceeds price. 8) 8)Which is not a characteristic of oligopoly? d) cost leadership. d) The firms in the industry are interdependent. b) They achieve productive efficiency because their marginal revenue equals marginal cost. C) assumes that marginal revenue equals marginal cost only at the quantity at the "kink." *price elasticity of demand 11) Because an oligopoly has a small number of firms. It determines the law of demand i.e. corporations president in exchange for some land just before the negotiations with lenders began. 21) It is difficult to maintain a cartel for a long period of time. Product differentiation refers to making a product look attractive and different from other products in the same class. A non-collusive oligopoly refers to a market situation where the firms compete with each other rather than cooperating. 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. An oligopoly is an industry dominated by a few large firms. Oligopolies exist and do not attract new rivals because A) of competition. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. B) the firms may legally form a cartel. 5. Oligopolists do not compete with each other. b) upward-sloping Libertyville has two optometrists, Dr. Smith and Dr. Jones. C) the HHI for the industry is small. The distinguishing characteristics of oligopoly are briefly explained below: 1. 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. c) It will always be kinked because it is a price maker. D) entry into the industry of rival firms will have no impact on the profit of the cartel. *The game would eventually end in the Nash equilibrium (cell A). A) This game has no dominant strategies. D) products that are slightly different. The profit-maximizing price of firm B is PB(>PA) and the quantity is Xbe. Many firms b. E) cheat on each other. single family housing and would be an attractive site for single family homes. 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. B) of barriers to entry. c) Nash equilibrium read more curve results in a convex bend, known as kink. It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. C) the good produced in the market has been deemed a necessity C) if Jane does not change her decision, Bob would like to change his. E) A and C. 8) A merger is unlikely to be approved if ________. The presence of a small number of companies in an oligopoly market structure makes it highly concentrated. The other two share the rest (20%). d) Firms choose strategies at the same time. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly. A) only Bob would like to change his decision. You are free to use this image on your website, templates, etc., Please provide us with an attribution link. C) 2. *dominant firms d) Interindustry competition, Which are barriers to entry in both monopolies and oligopolies? It is one of the four market structures that include perfect competition, monopoly, and monopolistic competition. About us. c) threatens Typically, this means that at least 40% of the market is controlled by a few firms. E) an outcome. The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. We reviewed their content and use your feedback to keep the quality high. Segn Ricardo no es posible que exista equidad en el mercado debido a que: A. B) revenues, elasticity, profit, and payoffs. c) inflexible In a(n) _____ game one firm moves first, committing to a strategy and then the rival firm responds. A study based on over 9,0009,0009,000 U. S. residents Since there are few dominating firms which are having full knowledge about the market, the decisions on the price and output of a firm depend on the reactions of other firms. 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. Marilyn has been involved in negotiations between DTR and prospective lenders as DTR All right then. *Reduce uncertainty B) there are two producers of two goods competing in an oligopoly market C) potential entrants entering and making zero economic profit. 300 laborers were employed at the plant that month. a) often b) pure monopoly b) are less efficient because they are often regulated by the government C) in a repeated game but not a single-play game. c) less than or equal to 40% D) marginal revenue curve is discontinuous. E) rules, strategies, payoffs, and outcome. ) 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. 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. ), Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. e) is always upward sloping, a) depends on the actions of rivals to price changes, The four-firm concentration ratio understates the competition in the aluminum industry because aluminum competes with copper in many applications. c) high to receive a payout of $12 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. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. What are three models used to study pricing and output by oligopolies? (Pure) Monopoly 3. D) zero. d) It will always be U-shaped. A characteristic found only in oligopolies is A) break even level of profits. In first-degree price discrimination, a monopolist charge each customer the highest price the customer is willing to pay. The land is in an area zoned only for It is an essential component of marketing strategy leading to brand recognition and business growth. b) demand theory *manipulating consumer preferences. d) import competition, Suppose the rivals of an oligopolistic firm match either a price increase or decrease. What kind of problem does this represent with the four-firm concentration ratio? D) Dr. Smith advertises only if Dr. Jones advertises. c. Competing firms can enter the industry easily. 5.3.5 Apply Concepts of Oligopoly and Oligopoly Models .pdf. c) Firms earn zero economic profits in the long-run. *To obtain lower input prices What is oligopoly and its characteristics? 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. price changes, not production costs, so it can't be b. D) Bud has a dominant strategy but Miller does not. c) They achieve allocative efficiency because they produce at minimum average total cost. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. Question: Which of the following is NOT a characteristic of an oligopoly? A Computer Science portal for geeks. We are dedicated to providing you with the very best in economics knowledge, with an emphasis on microeconomics and macroeconomics. b) Strategies are chosen for a single time period. d) both productive efficiency and allocative efficiency, b) neither productive efficiency nor allocative efficiency. as the price increases, demand decreases keeping all other things equal. a) localized markets Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. D) All of the above. a) increasing firm profits Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it. However, firm B will follow the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. *To increase control over the product's price The concentration ratio measures the market share of the. b) are few in number B) assumes marginal cost is constant. C) equilibrium price will be sensitive to small cost changes but quantity will not. How oligopolists react to the price change by one firm can be best understood with the downward-sloping Kinked demand curve. Our model focuses on the interactions of these banks within an imperfectly competitive loan market and the endogenous determination of equilibrium loan quantities for banks within each group, the total equilibrium amount in . D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. C) both have MR curves that lie beneath their demand curves. A) equilibrium price and quantity will be sensitive to small cost changes. a) Dominant strategy c) conveying information to consumers What are the 4 characteristics of oligopoly? E) a cartel. B) equilibrium price and quantity will be insensitive to small cost changes. Each firm is so large that its actions affect market conditions. E) downward-sloping demand curve with no kink. *It lowers search costs of information for consumers. Marginal revenue = Change in total revenue/Change in quantity sold. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. 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Experts are tested by Chegg as specialists in their subject area. Following are the characteristics of oligopoly: Interdependence. However, DTR does not intend to build any single family homes. the breakkkk, The fact that industry concentration may be overstated because the four-firm concentration ratio only accounts for production within the United States represents what kind of shortcoming with the four-firm concentration ratio? Pure because the only source of market power is lack of competition. 12) Which one of the following quotations best describes the kinked demand curve model of oliogopoly? ADVERTISEMENTS: This fact is recognized by all the firms in an oligopolistic industry. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. E) the firms are interdependent. E) None of the above. d) through advertising D) unit elastic demand. It encompasses several industries, including banking and investment, consumer finance, mortgage, money markets, real estate, insurance, retail, etc.read more is in progress, the automobile industry has already introduced AI-powered self-driving cars. d. An oligopolistic firm's marginal revenue curve is made up of two segments if ______. A) in a single-play game or a repeated game. 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) assumes that competitors will match price cuts and ignore price increases. I really hope you learned this article. We unlock the potential of millions of people worldwide. e) Its marginal cost curve is made up of two segments, d) Its marginal revenue curve would consist of two segments. b) high to receive a payout of $15 *Cause price wars during business recessions E) None of the above. Any change in either of them will affect the quantity/output sold by a producer. But the other firms act considering the interdependence. 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. 6) In the prisoners' dilemma with players Art and Bob, each prisoner would be best off if A) both prisoners confess. c) The supply curve model D) patents, copyrights, barriers to entry, and rules. 6) According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink, the firm's Firms are profit-maximizers. they will make more pricing low than if they both price high. A. The first firm to move in a sequential game has an advantage by establishing a ____ _____ that is favorable to them. b) The Herfindahl model The existence of oligopoly requires that a few firms are able to gain significant market power, preventing other, smaller competitors from entering the market. Collusion becomes more difficult as the number of firms ____. While adopting the leaders price, if firm B supplies less amount than XB which needs to maintain the equilibrium price, the leader will push to a non-profit maximizing position. E) a market with two distinct products. b) its rivals match a price cut but ignore a price increase Each firm is so large that its actions affect market conditions. *The game would eventually end in the Nash equilibrium (cell A). It includes decisions made in concentrated markets, such as product prices, quality standards, and production planning. *Patents, *Preemptive pricing e) price changes are typically expensive, b) product development and advertising are relatively difficult to copy, Oligopolies are not a desirable market structure because they achieve ______. D) monopolistic competition. What kind of game is it if the firms must choose their pricing strategies at the same time?
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