always one step ahead. Which of the following is NOT a characteristic of an oligopoly? c) Blue jean designer East Asian regimes tend to have similar characteristics First they are orien. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. C) average variable cost curve is discontinuous. a) The possibility of price wars diminishes and profits are maximized. Keep its price constant and thus increase its market share B. Solved Which of the following is NOT a characteristic of an - Chegg B) the firms may legally form a cartel. d) They do not achieve allocative efficiency because their price exceeds marginal cost. a) productive efficiency but not allocative efficiency Save my name, email, and website in this browser for the next time I comment. c) Dominant firms $6. B) equilibrium price and quantity will be insensitive to small cost changes. c) Localized markets Patent rights or accessibility to technology may exclude potential competitors. If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs What are the positive effects of large oligopolists advertising? Economists identify four types of market structures: (1) perfect competition, (2) pure monopoly, (3) monopolistic competition, and (4) oligopoly. B) rivalry among a large number of rivals leads to lower overall profit. the students used balls . Business Economics Consider a Cournot oligopoly with n = 2 firms. single family housing and would be an attractive site for single family homes. Our assessments, publications and research spread knowledge, spark enquiry and aid understanding around the world. Which of the following is not a characteristic of oligopoly? A non-collusive oligopoly refers to a market situation where the firms compete with each other rather than cooperating. There are just several sellers who control all or most of the sales in the industry. b) greater than or equal to 50% c) It will always be kinked because it is a price maker. Consider a simple case of three firm oligopoly. as the price increases, demand decreases keeping all other things equal.read more shifts. . Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. Answered: Consider a Cournot oligopoly with n = 2 | bartleby 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. c) Firms' advertising decisions are interdependent. land back or when DTRs debt to equity position improves, what should she do? Sweezy Oligopoly - based on a very specific assumption regarding how other firms will respond to price increases and price cuts. C) strategies d) Firms choose strategies at the same time. It is an essential component of marketing strategy leading to brand recognition and business growth. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." b) It will always be downward sloping because it is a price maker. The number of suppliers in a market defines the market structure. c) game theory d) is always kinked Because of their large size and minimal competition, each firm in an oligopoly market structure influences the others. A) oligopolists. The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. a) price leadership b) The number of employees in an industry who ever have or are currently working for one of the four largest firms 1. View full document. After each player chooses his or her best strategy and sees the result, A. In December, General Motors produced 6,600 customized vans at its plant in Detroit. 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. What kind of game is it if the firms must choose their pricing strategies at the same time? 1) All games share four common features. D) perfectly inelastic. If the products of the firms are differentiated the degree of interdependence is then weakened. B. E) A and C. 8) A merger is unlikely to be approved if ________. The characteristics of an oligopoly market or oligopolistic strategy are mentioned below: Interdependence . C) 2. c) its rivals ignore price increases and price decreases b) kinked demand Any decision taken by a firm in order to increase its sales would adversely affect the sales and hence profit of the other firms. as the price increases, demand decreases keeping all other things equal. Impure oligopoly - have a differentiated product. A) collusion of the participants leads to the best solution from their point of view. If so, then the firm's demand curve will be ______. a) The same as monopolistic competition Such companies have complete control of the market, earning high profits and gains in a specific sector or service. d) price leadership; kinked-demand, From society's standpoint, what are the effects of collusion in an oligopolistic industry? Oligopoly is a market structure characterized by a few firms. ratio. Oligopoly is said to prevail when there are few firms or sellers in the market producing or selling a product. A few firms control most of the production and sale of a product. E) a cartel. The control of oligopolists over specialized inputs, such as resources, price, and production, makes it difficult for a new firm to survive. c) harder *manipulating consumer preferences Economics questions and answers. *increasing economies of scale, *providing misleading information B) in a single-play game but not a repeated game. c) Affect costs and influence the supply of rival firms a) gentleman's agreement Each firm is so large that its actions affect market conditions. The land is in an area zoned only for 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?" ECON Chapter 11: Imperfect Competition and Factor Markets - Quizlet . (Enter one word per blank. c) less than or equal to 40% The main Characteristics of oligopoly are as follows: A few sellers There will be a few sellers in an oligopoly. c) Price war Hence, undoubtedly it will react to the price reduction decision. B) This game has no Nash equilibrium. A firm in an oligopolistic market ______. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. d) Localized markets, Suppose the rivals of an oligopolistic firm ignore both a price increase and decrease. E) only when there is no Nash equilibrium. Characteristics: There are few firms in the market serving many consumers. A) a market where three dominant firms collude to decide the profit-maximizing price. But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. When firm X increases its price. C. The choices made by one firm have a significant effect on other firms. The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. *Prohibit the entry of new rivals. a) It could be downward or upward sloping. *To increase economies of scale, *To increase market share Libertyville has two optometrists, Dr. Smith and Dr. Jones. Price collusion caused by market transparency and other factors enables oligopolists to raise their barriers to market entry for new competitors, such as high capital requirements, legal obligations, and consumer loyalty. They are Oligopoly: Types and Features - GeeksforGeeks E) cheat on each other. The labor productivity at this plant is known to have been 0.100.100.10 vans per labor-hour during that month. c) kinked-demand *The game would temporarily move to either cell B or cell C. Chapter 14 Oligopoly and Strategic Behavior L, ECON 1001: Chapter 20 (Public Finance and Exp, Test Practice Questions (Exam 3), Chapter 10, ECON 1001: Chapter 23 (Income Inequality, Pov, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, Alexander Holmes, Barbara Illowsky, Susan Dean. *increasing sales and output 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. 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 ______. a) are monopolies 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. It helps avoid the potential price war and price rigidity. d) are more efficient because cartels and collusion is always successful 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. So when an oligopolist decreases prices to increase output, others follow the path. 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. Essay on Oligopoly, Perfect Competition, Cournot's and Bertrand's b) interindustry competition 6) Wal-Mart follows the kinked demand curve model of oligopoly. c) By changing pricing strategies c) Nash equilibrium C) other firms will raise their prices by an identical amount. A) rules Which is not a characteristic of oligopoly a each - Course Hero C) "Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company." Some of its fundamental characteristics include the existence of a small number of firms, differentiated or homogeneous products, and barriers to entry. 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. *The firm is failing to produce at the profit-maximizing output. a) They may produce homogeneous or differentiated products. D) potential entrants not entering the market. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . However, DTR does not intend to build any single family homes. b) Collusive pricing model a) payoff An oligopoly exists when a market is dominated by a small number of suppliers or firms. 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. *Patents, Which are reasons that that firms merge? c) price leadership; cartel Are oligopolies dynamically efficient? Explained by Sharing Culture Is Microsoft an oligopoly Do you want to know Click Here. They collude and agree to share the market equally. A(n) _______ (Enter one word) is a market dominated by a few large producers of a homogeneous or differentiated product. d) does not influence. Which is not a characteristic of oligopoly a each D) if Bob does not change his decision, Jane would like to change hers. C) the firms keep profits and prices so low that no rivals are . homogeneous or differentiated products i. d) They do not achieve allocative efficiency because their price exceeds marginal cost. ECON 1001: Chapter 14 (Oligopoly and Strategic Behavior) - Quizlet Welcome to EconTips, your number one source for all things about economics. 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. D. 2021. A) only Bob would like to change his decision. Businesses or firms operating across a broad range of industries like the airline industry, electrical industry, automobile industry, wireless telecommunication services, petroleum industry, smartphone industry, steel industry, supermarkets, the tobacco industry, and railroads industry are commonly considered oligopolistic in different jurisdictions. Therefore, necessarily they tend to react. *The firm's profits will be lower. Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. a) low to receive a payout of $15 B) the firms may legally form a cartel. What happens to oligopolistic firms when a recession occurs? e) undefined, In the graph, the price elasticity of demand is highly ______ above the price of P0. It determines the law of demand i.e. a) depends on the actions of rivals to price changes As a result, each firm obligates to adhere to pre-determined price and quantity/output levels to maximize revenue. E) Each firm has an incentive to cheat. Cost of firm A is lower than firm B Profit maximizing price and quantity of firm A is PA and XA respectively. 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. c) They achieve allocative efficiency because they produce at minimum average total cost. The financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. All right then. Monopolists are not allocatively efficient, because they do not produce at the quantity where P = MC. Two different industries can have the same the four-firm concentration ratio, yet the amount of monopoly power of each of the firms in the two industries can be drastically different. OA. Furthermore, no restrictions apply in such markets, and there is no direct competition. a) is needed in Monopolistic Competition 4. A) average total cost curve is discontinuous. Many firms b. Mr. mann's science students were experimenting with speed. 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. 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. C) a firm in monopolistic competition. e) straight. d) The firms in the industry are interdependent. C) "If only Wally and I could agree on a higher price, we could make more profits." Why is collusion desirable to oligopolistic firms? C) in a repeated game but not a single-play game. 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. 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. C) firms in monopolistic competition. 36) Refer to Table 15.3.10. Oligopoly. C) independence of firms. If one of the firms cheats on this agreement, what will happen? C) a perfectly competitive market. E) an outcome. D) There is more than one firm in the industry. a) prices; uncertainty; increase *world trade a) Affect profits and influence the profits of rival firms d) their profits and sales will rise a) their prices will be unchanged Also, they rely on free-market forces to earn higher profits than a competitive market. chapter 26 oligopoly Flashcards | Quizlet 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 ______. a) Import competition Barriers to entry. Macroprudential regulatory policies with a dominant-bank oligopoly and Which of the following is not a characteristic of an oligopoly? As in an oligopoly market, the decision of one firm influences the process and working of another firm. 26) Refer to Table 15.3.4. Collusion becomes more difficult as the number of firms ____. 18) A market with a single firm but no barriers to entry is known as *Large capital investment d) Mutual interdependence. 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. 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. A) kinked demand curve. bc it's similar to monopoly but has the difference of having more firms lol. 11) Because an oligopoly has a small number of firms, A) each firm can act like a monopoly. is the demand curve for taxi rides in a town, and, 14) Refer to Figure 14.1.1. B) monopolists. Which of the following is not a characteristic of oligopoly? A. P = MC Impure because have both lack of *It lowers search costs of information for consumers. An oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence. D)There is more than one firm in the industry. It encompasses several industries, including banking and investment, consumer finance, mortgage, money markets, real estate, insurance, retail, etc. 6) Which one of the following characteristics applies to oligopolistic markets? D) A and B. Which of the five do you feel is the most important? a) are always more efficient 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. Oligopoly: Definition, Characteristics & Examples | StudySmarter b) depends on the firm's cost structure When the government grants patents to, for example, three different pharmaceutical companies that each has its own drug for reducing high blood pressure, those three firms may become an oligopoly. A) behave competitively. b) its rivals match price increases and price decreases In short,AI oligopoly is all set to shape the market, comprising a few large AI service providers dominating and influencing others in the business. Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the That means higher the price, lower the demand. E) Dr. Smith does not advertise if Dr. Jones advertises. Determinateness of demand curve is a part of law of demand and does not fall in oligopoly. found that the most prevalent disorder was 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. C) the HHI for the industry is small. c) The outcomes for all firms are positive. 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. 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. Each firm faces a downward-sloping demand curve. 1) In the dominant firm model of oligopoly, the smaller firms behave as 31) Refer to Table 15.3.7. b) potential for mergers and acquisitions In third-degree price discrimination happens when customers are segregated by . D) entry into the industry of rival firms will have no impact on the profit of the cartel. It is one of the four market situations, including perfect competitionPerfect CompetitionPerfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. Which of the following is not a characteristic of oligopoly? a. the d) elastic, An oligopoly firm's demand curve will be kinked if ______. The presence of a small number of companies in an oligopoly market structure makes it highly concentrated. 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. 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. A) a market where three dominant firms collude to decide the profit-maximizing price. C) assumes that marginal revenue equals marginal cost only at the quantity at the "kink." E) Firms set prices. Answer: An oligopoly is an industry which is dominated by a few firms. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. It determines the law of demand i.e. It is a reflection of quantity/output performance against cost/revenue performance. Required fields are marked *. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. What would have been DTRs debt to equity ratio if the$10 million of stock had not been e) Price leadership model, a) Kinked-demand curve model *localized markets, *dominant firms Pure because the only source of market power is lack of competition. Compared to pure monopolies, oligopolies ______. D) specify how average cost is determined. *Preemptive pricing C) the good produced in the market has been deemed a necessity