In the credit card industry, for example, Visa and MasterCard have a more. C) Art denies and Bob confesses. It determines the law of demand i.e. c) is always downward sloping C. Some market power. They do so through collusion that results in higher prices and fewer production or product choices for customers. B) total revenue. Interdependence 7) The kinked demand curve theory of oligopoly predicts that c) price leadership While it is true that strategic behavior and mutual interdependence characterize oligopolies, this is not the reason why they are price makers. e) Price leadership model, a) Kinked-demand curve model Oligopoly is a market with a few firms and in which a market is highly concentrated. D) potential entrants not entering the market. Course Hero is not sponsored or endorsed by any college or university. A. C) potential entrants entering and making zero economic profit. d) Firms choose strategies at the same time. The distinctive feature of an oligopoly is interdependence. In other words, when there are two or more than two, but not many, producers or sellers of a product, oligopoly is said to exist. So go ahead and leave a comment below. 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. B) Other firms will enter the industry. . Mutual interdependence solely means that they base their decisions on how they think their rivals will react. 2003-2023 Chegg Inc. All rights reserved. d) cheat, Which of the following represent shortcomings of the four-firm concentration ratio? Libertyville has two optometrists, Dr. Smith and Dr. Jones. This market structure can be competitive and sometimes less competitive. c) horizontal or perfectly elastic *To decrease monopoly power Oligopolistic behavior implies that oligopolists prefer competition ______. 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. homogeneous or differentiated products i. C) a perfectly competitive market. 8) A weakness of the kinked demand curve theory of oligopoly is that it does not C) lower the price of their products. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." D) patents, copyrights, barriers to entry, and rules. b) Its demand curve is downward-sloping 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. a) collusion; cartel c) Kinked-supply curve model 2. True or false: Firms in an oligopoly always produce a homogeneous product. Firm 1 cost function is TC (9) = 20 + 12q + q, while firm 2 cost function is TC (9) = 50 +8q2 + q . Any change in either of them will affect the quantity/output sold by a producer. B) 1. The land is in an area zoned only for C) assumes that marginal revenue equals marginal cost only at the quantity at the "kink." It is calculated by dividing the change in the costs by the change in more is the cost of productionCost Of ProductionProduction Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. Marginal revenue = Change in total revenue/Change in quantity sold. Barriers to entry. A) Dr. Smith advertises no matter what Dr. Jones does. A) Each firm has an incentive to collude. What kind of game is it if the firms must choose their pricing strategies at the same time? D) There is more than one firm in the industry. C) perfectly elastic. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. If this game is nonrepeated, the Nash equilibrium is A) both firms cheat on the agreement. Keep its price constant and thus increase its market share B. Advertising can reduce efficiency by ______. B) monopolists. About us. B) a market where two firms compete for profit and market share. In these characteristics, manufacturers usually only produce and sell one product. E) downward-sloping demand curve with no kink. c) Localized markets It also means that each firm must be aware of the reaction of others to their actions. 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. c) dominant firms *Patents, Which are reasons that that firms merge? D) the industry is government regulated Answers: 1 Show answers Another question on Social Studies. Monopolistic Competition 4. a) major firms in an industry ranked by employment Firm A and Firm B are the only producers of soap powder. But the other firms act considering the interdependence. D) A and B. B) raise the price of their products. b) legal 18) A market with a single firm but no barriers to entry is known as d) straight and steep East Asian regimes tend to have similar characteristics First they are orien. e) straight. C. The choices made by one firm have a significant effect on other firms. 1) In the dominant firm model of oligopoly, the smaller firms behave as The number of suppliers in a market defines the market structure. It is used as one of the strategies to increase the business firm's revenue and increase the market share. Collusion becomes more difficult as the number of firms ____. c) Its marginal cost curve is made up of two segments Marginal revenue = Change in total revenue/Change in quantity sold. In an oligopoly, dominant market players are influential enough to decide on the price of products and services. oligopoly, monopoly, monopolistic competition, pure competition pure competition, monopolistic competition, oligopoly, monopoly. C) firms in monopolistic competition. Following are the characteristics of oligopoly: 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. $4. Non-Collusive Oligopoly-Sweezy's Kinked Demand Curve Model (Price-Rigidity) Usually, in Oligopolistic markets, there are many price rigidities. It encompasses several industries, including banking and investment, consumer finance, mortgage, money markets, real estate, insurance, retail, more is in progress, the automobile industry has already introduced AI-powered self-driving cars. a) The possibility of price wars diminishes and profits are maximized. a) Its demand curve is downward-sloping A) oligopolists. 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 ____. 0. 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. 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 ______. As their products seem visually identical, both the brands have to make sure they offer customers something that the other does not. c) may be less desirable because they are not regulated by government to protect consumers 5.3.5 Apply Concepts of Oligopoly and Oligopoly Models .pdf. C) there are numerous producers of two goods competing in a competitive market E) both are price takers. a) The same as monopolistic competition This way, Samsung and Nokia ensure non-price competition by enhancing core capabilities to build a loyal customer base. They may produce homogeneous products or differentiated products. *interindustry competition C) one prisoner has no chance to be acquitted since there is no other prisoner to support his testimony. What kind of game is it when firms choose their optimal pricing strategy today without worrying about possible interactions in the future? *To increase control over the product's price E) A and C. 8) A merger is unlikely to be approved if ________. E) None of the above. Which of the following is not a characteristic of an oligopoly? C. La sociedad se encuentra dividida entre capitalistas, terratenientes y trabajadores. d) does not influence. as the price increases, demand decreases keeping all other things equal. read more, and marginal revenue is the product price. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. However, firm B will follow the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. 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. Marginal costMarginal CostMarginal cost formula helps in calculating the value of increase or decrease of the total production cost of the company during the period under consideration if there is a change in output by one extra unit. a) The possibility of price wars diminishes and profits are maximized. *It lowers search costs of information for consumers. c) its rivals match a price increase but ignore a price cut . (Pure) Monopoly 3. In third-degree price discrimination happens when customers are segregated by . D) its profit will rise by the same percentage. A) there are only two producers of a particular good competing in the same market always one step ahead. Which is the simple form of oligopoly market? c) Firms' advertising decisions are interdependent. 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 more, etc. b) price leadership; collusion d. Why Developing Countries Should Focus on International Trade? A) potential entrants entering and making monopoly profit. They are D) marginal revenue curve is discontinuous. d) It will always be U-shaped. B) a market where two firms compete for profit and market share. e) increasing search time. c) through product development If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs (Enter one word for each blank. A) is; to comply regardless of the other firm's choice D) "I have been spending extra on research and development of my new two-way widget." Marginal cost formula helps in calculating the value of increase or decrease of the total production cost of the company during the period under consideration if there is a change in output by one extra unit. 3) The Nash equilibrium for a sequential game in a contestable market with locked-in first stage prices results in But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. 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. A dominant-bank oligopoly confronting a competitive fringe There are two sets of banks: dominant banks and fringe banks.