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. 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?" 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. B) both prisoners deny. Gentleman's agreements are a type of covert collusion, occurring in social settings where a product's _____ is agreed upon and market shares are determined by _____ competition. b) Mutual interdependence It is an essential component of marketing strategy leading to brand recognition and business growth. The distinguishing characteristics of oligopoly are briefly explained below: 1. *Ownership and control of raw materials *The firm is failing to produce at the profit-maximizing output. The core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. a) low to receive a payout of $15 300 laborers were employed at the plant that month. D)There is more than one firm in the industry. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. c) Firms' advertising decisions are interdependent. Over a long time period, cheating ______ collusive oligopolies *The game would temporarily move to either cell B or cell C. Any decision taken by a firm in order to increase its sales would adversely affect the sales and hence profit of the other firms. E) 10,000. a) localized markets Without collusion, if a firm incorrectly assumes that its rivals will charge the same price but its rivals actually charge a lower price, the firm's demand curve will shift to the ____. debt to equity ratio and that it will be reversed whenever the presidents friend wants the c) Affect costs and influence the supply of rival firms d) Firms choose strategies at the same time. While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. Oligopolies are typically composed of a few large firms. However, firm B follows the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. PDF Market Structure: Oligopoly (Imperfect Competition) 5) Which one of the following is not a feature common to all games? 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. 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) may be less desirable because they are not regulated by government to protect consumers B) neither player would be willing to change his or her decision unless the other player also changes his or her decision. Oligopoly is said to prevail when there are few firms or sellers in the market producing or selling a product. What are the 4 characteristics of oligopoly? Oligopoly - Definition, Characteristics and Examples | Microeconomics 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. c) Localized markets *increasing economies of scale, *providing misleading information A. cutting prices E) None of the above. A) Each firm has an incentive to collude. 4. Social Studies, 22.06.2019 00:00. b) Interindustry competition D) marginal revenue curve is discontinuous. price rigidity Element of monopoly. which of the following is a characteristic of monopolistic competition One of theoligopoly characteristicsis the focus of its members on improving the product quality or offering benefits to make their brand unique. D) There is more than one firm in the industry. *The firm is failing to produce at the profit-maximizing output. Firms are profit-maximizers. Impure because have both lack of E) marginal revenue curve is upward sloping. 2003-2023 Chegg Inc. All rights reserved. D) There is more than one firm in the industry. b) OPEC An example of a pure oligopoly would be the steel industry, which has only a few producers but who produce exactly the same product. C) the HHI for the industry is small. C) in a repeated game but not a single-play game. Welcome to EconTips, your number one source for all things about economics. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. This way, Samsung and Nokia ensure non-price competition by enhancing core capabilities to build a loyal customer base. a) Affect profits and influence the profits of rival firms 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 ______. Imperfect or Differentiated Oligopoly: ADVERTISEMENTS: Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. d) Its marginal revenue curve would consist of two segments, d) Its marginal revenue curve would consist of two segments They may produce homogeneous products or differentiated products. A study based on over 9,0009,0009,000 U. S. residents corporations president in exchange for some land just before the negotiations with lenders began. Furthermore, no restrictions apply in such markets, and there is no direct competition. b) are always less efficient D) zero. Firm A and Firm B are the only producers of soap powder. land back or when DTRs debt to equity position improves, what should she do? As in an oligopoly market, the decision of one firm influences the process and working of another firm. D) the one producer of two goods sells the goods in a monopoly market d) The same as a monopoly, By controlling ______ through collusion, oligopolists may be able to reduce ______, ______ profits and block the entry of new rivals. b) collusion *mutual interdependence In an oligopoly, dominant market players are influential enough to decide on the price of products and services. b) Affect profits without influencing the profits of rival firms The number of suppliers in a market defines the market structure. D) entry into the industry of rival firms will have no impact on the profit of the cartel. A) Each firm faces a downward-sloping demand curve. *The game would eventually end in the Nash equilibrium (cell B or C). 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. 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. Oligopoly theory | Industrial economics | Cambridge University Press It can be also called as one form. price changes, not production costs, so it can't be b. ECON 1001: Chapter 14 (Oligopoly and Strategic Behavior) - Quizlet A single b) Firms may sell a homogeneous product. Barriers to entry. C) is; the dominant firm is making an economic profit Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. D) if Bob does not change his decision, Jane would like to change hers. c) By changing pricing strategies You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. b) product development and advertising are relatively difficult to copy B) the firms may legally form a cartel. 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. Even though the products of companies A and B are similar, there must be something that distinguishes them. 7) Why might only a few firms dominate an oligopolistic industry? E) marginal cost. E) potential entrants taking all the business away from existing firms. d) They do not achieve allocative efficiency because their price exceeds marginal cost. is the demand curve for taxi rides in a town, and, 14) Refer to Figure 14.1.1. *The game would eventually end in the Nash equilibrium (cell A). d) Mutual interdependence. *To increase control over the product's price B) raise the price of their products. a) are always more efficient What is the Nash equilibrium? 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. Oligopolists offer comparable products or services, so they control prices rather than the market. The characteristics of oligopoly include interdependence, product differentiation, high barriers to entry, uncertainty, price setters. a) L-shaped Top 9 Characteristics of Oligopoly Market - Economics Discussion Consequently, the sales of the other firm will be definitely reduced by the same percentage. Greater the number of firms, the higher the degree of interdependence. *The firm's demand curve will shift further to the left. Mr. mann's science students were experimenting with speed. D) "I have been spending extra on research and development of my new two-way widget." It is the most important feature of an oligopolistic market. Marilyn is also aware that DTR issued$10 million of common stock to a long-time friend of the The policy implementation process has not taken in to account the life of rural peasants living in vicinity of cities. Eco Finals - Lesson 1 | PDF | Monopoly | Oligopoly Pure oligopoly - have a homogenous product. In a(n) _____ game one firm moves first, committing to a strategy and then the rival firm responds. Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. 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? Oligopoly Market Definition Characteristics Types and Examples E) the firms are interdependent. b) kinked demand B) of barriers to entry. 11) Which one of the following quotations best describes a dominant firm oligopoly? Monopolists are not allocatively efficient, because they do not produce at the quantity where P = MC. 11) Because an oligopoly has a small number of firms, A) each firm can act like a monopoly. c) dominant firms Consider a simple case of three firm oligopoly. A) "Gas prices in this town always go up and down together." 18) A market with a single firm but no barriers to entry is known as O D. Some barriers to entry. b) Strategies are chosen for a single time period. Which of the following is not a characteristic of oligopoly? In the credit card industry, for example, Visa and MasterCard have a duopoly.read more. In this market, there are a few firms which sell homogeneous or differentiated products. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. *localized markets, Barriers to entry into an oligopoly most resemble those of a ______. 14) The kinked demand curve model B) in a single-play game but not a repeated game. 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 . A) specify the technology of production. Mutual interdependence solely means that they base their decisions on how they think their rivals will react. C) potential entrants entering and making zero economic profit. Your email address will not be published. 1. In the graph, the price elasticity of demand is ______ below the price of P0. Required fields are marked *. 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. If the products of the firms are homogeneous then the interdependence will tend to be strong because of the perfect substitutability of the products of the firms. For an industry to be considered an oligopoly the four-firm concentration ratio must be ______. *Ownership and control of raw materials D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. For example, it has been found out that insulin and the electrical industry are highly oligopolist in the US. Which of the following is not a characteristic of an oligopoly? characterized by the presence of a few large firms who produces e) Its marginal cost curve is made up of two segments, d) Its marginal revenue curve would consist of two segments. What kind of game is it when firms choose their optimal pricing strategy today without worrying about possible interactions in the future? D) equilibrium quantity will be sensitive to small cost changes but price will not. a) greater than or equal to 40% B) perfectly inelastic demand. Which of the following is not a characteristic of oligopoly? A. P = MC Oligopolistic Market - Overivew, Examples, How an Oligopoly Works E) a competitive market produces two goods. A few firms control most of the production and sale of a product. *It lowers search costs of information for consumers. *Prohibit the entry of new rivals, *Reduce uncertainty The presence of a small number of companies in an oligopoly market structure makes it highly concentrated. a) Dominant strategy a) increasing firm profits E) none of the above is done. Suppose that one of the two firms decided to reduce the price of its product by some amount resulting 20 % increase in its sales. O B. b. 6) Wal-Mart follows the kinked demand curve model of oligopoly. In doing so, they reduce production and increase prices, a phenomenon called collusion. Oligopoly is a market with a few firms and in which a market is highly concentrated. Oligopoly Characteristics: 4 Important Characteristics of Oligopoly Which of the following is not a characteristic of oligopoly? - Toppr Ask 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). chapter 26 oligopoly Flashcards | Quizlet The distinctive feature of an oligopoly is interdependence. Pure (Perfect) Competition. a) their prices will be unchanged C) there are numerous producers of two goods competing in a competitive market e) It could be downward sloping or kinked. 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 b) Collusive pricing model 12) Because an oligopoly has a small number of firms Because of this, every firm takes decisions very carefully by considering the possible reactions of the rival firms. Which of the following correctly arranges market structures in order B) equilibrium price and quantity will be insensitive to small cost changes. Course Hero is not sponsored or endorsed by any college or university. It is difficult to enter an oligopoly industry and compete as a small start-up company. Let us consider the followingexamplesto understand the concept better: Samsung and Nokia are two big players in the Android smartphones industry, with the former trying to capture the market by keeping the price lenient. 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. Oligopoly Models: 1. 9) Which is not a characteristic of oligopoly? Economists identify four types of market structures: (1) perfect competition, (2) pure monopoly, (3) monopolistic competition, and (4) oligopoly. as the price increases, demand decreases keeping all other things equal.read more shifts. what are the 5 characteristics of an oligopoly? b) By increasing recruiting expenses The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. The distinctive feature of an oligopoly is interdependence. A)Each firm faces a downward -sloping demand curve. Furthermore, no restrictions apply in such markets, and there is no direct competition. 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. In December, General Motors produced 6,600 customized vans at its plant in Detroit. A) 0. b) are few in number Final Exam Study - Oligopoly And Game Theory ECON D) monopolistic competition. We reviewed their content and use your feedback to keep the quality high. 26) Refer to Table 15.3.4. E) Firms set prices. E) cheat on each other. Each firm is so large that its actions affect market conditions. (Enter one word per blank. from chapter 12 ^-^, What is the only stable outcome in a payoff matrix? 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. Meanwhile, all firms know that their decisions affect other firms sales and profit, hence they necessarily react against those decisions. b) increasing monopoly power A Computer Science portal for geeks. The labor productivity at this plant is known to have been 0.100.100.10 vans per labor-hour during that month. View full document. $4. *It eliminates competition among firms. 6) According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink, the firm's The group that colludes is referred to as a cartelCartelA 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.read more. Oligopoly Defined: Meaning and Characteristics in a Market - Investopedia c) harder 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. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. 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]. a) The possibility of price wars diminishes and profits are maximized. B) it prevents or substantially lessens competition