5) Which one of the following is not a feature common to all games? D) monopolistic competition. Firm 1 cost function is TC (9) = 20 + 12q + q, while firm 2 cost function is TC (9) = 50 +8q2 + q . *providing misleading information E) an outcome. Oligopolists do not compete with each other. 8) A weakness of the kinked demand curve theory of oligopoly is that it does not After each player chooses his or her best strategy and sees the result, Any decision taken by a firm in order to increase its sales would adversely affect the sales and hence profit of the other firms. Each firm is so large that its actions affect market conditions. C) is; to cheat regardless of the other firm's choice *Increase profits b) Lower prices, but greater output The distinguishing characteristics of oligopoly are briefly explained below: 1. price changes, not production costs, so it can't be b. D) A and B. 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. 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. *The firm's profits will be higher. c) allocative efficiency but not productive efficiency A) a market where three dominant firms collude to decide the profit-maximizing price. Typically, this means that at least 40% of the market is controlled by a few firms. c) regulated monopoly B. a) inelastic All firms stick to what has been decided, thereby ensuring price stability in the sector. . C) perfectly elastic. a) are monopolies C) lower the price of their products. 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. Hence, undoubtedly it will react to the price reduction decision. The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. For example, when a government grants a patent for an invention to one firm, it may create a monopoly. A. cutting prices b) interindustry competition E) potential entrants taking all the business away from existing firms. a) depends on the actions of rivals to price changes c) give the appearance of increased competition c) have no rivals 11) Which one of the following quotations best describes a dominant firm oligopoly? E) marginal revenue curve is upward sloping. Oligopoly Models: 1. A) average total cost curve is discontinuous. c) Localized markets The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. *mutual interdependence D) All of the above. Firm A and Firm B are the only producers of soap powder. Select one: O a. there are a few firms that are mutually interdependent O b. when one firm in an oligopoly raises its price, other firms will follow O c. firms may collude in order to act like a monopoly O d. barriers to entry exist to limit the entrance of new firms C) Miller has a dominant strategy but Bud does not. Impure oligopoly - have a differentiated product. B) Other firms will enter the industry. c) is always downward sloping 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. So when an oligopolist decreases prices to increase output, others follow the path. A monopoly occurs when. In the credit card industry, for example, Visa and MasterCard have a duopoly. 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. 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 doing so, they reduce production and increase prices, a phenomenon called collusion. . a) greater than or equal to 40% D) potential entrants not entering the market. they set up a 1 meter (100 cm) track. 1) In the dominant firm model of oligopoly, the smaller firms behave as Mutual interdependence among the firms in decision making is the essential feature of the oligopolistic market. *It eliminates competition among firms. B) both firms comply with the agreement. Why does a rise in the current asset to total asset ratio result in a decline in net working capital's estimate of both profits and risk? 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. d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products. Why Developing Countries Should Focus on International Trade? d) straight and steep You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Course Hero is not sponsored or endorsed by any college or university. Furthermore, no restrictions apply in such markets, and there is no direct competition. ratio. *Ownership and control of raw materials 31) Refer to Table 15.3.7. c) game theory 3) The Nash equilibrium for a sequential game in a contestable market with locked-in first stage prices results in d) easier. c) may be less desirable because they are not regulated by government to protect consumers Which of the following represents the problem with the four-firm concentration ratio? C) Firms in the cartel will want to raise the price. 3) Which one the following industries is the best example of an oligopoly? Which scenario describes a simultaneous game? Why do the elements of structure, such as work specialization, formalization, span of control, chain of command, and centralization, have a tendency to change together? D) Bob denies and Art confesses. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . View full document. Pure oligopoly - have a homogenous product. A Computer Science portal for geeks. O D. Some barriers to entry. Thus, the land is worth a) Kinked-demand curve model It is a reflection of quantity/output performance against cost/revenue performance. d) game theory. is the demand curve for taxi rides in a town, and, 14) Refer to Figure 14.1.1. 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) Which one of the following industries is the best example of an oligopoly? These data are as follows: 30.334.531.130.933.731.933.131.130.032.734.430.134.631.632.432.831.030.230.232.831.130.733.134.431.032.230.932.134.230.730.730.730.630.233.436.830.231.530.135.730.530.630.231.430.730.637.930.334.130.4\begin{array}{lllll}30.3 & 34.5 & 31.1 & 30.9 & 33.7 \\ 31.9 & 33.1 & 31.1 & 30.0 & 32.7 \\ 34.4 & 30.1 & 34.6 & 31.6 & 32.4 \\ 32.8 & 31.0 & 30.2 & 30.2 & 32.8 \\ 31.1 & 30.7 & 33.1 & 34.4 & 31.0 \\ 32.2 & 30.9 & 32.1 & 34.2 & 30.7 \\ 30.7 & 30.7 & 30.6 & 30.2 & 33.4 \\ 36.8 & 30.2 & 31.5 & 30.1 & 35.7 \\ 30.5 & 30.6 & 30.2 & 31.4 & 30.7 \\ 30.6 & 37.9 & 30.3 & 34.1 & 30.4\end{array} c) The percentage of total industry sales accounted for by the four largest firms 0) If the efficient scale of production only allows three firms to supply a market, the market is a. d) its rivals match price decreases but ignore price increases, d) its rivals match price decreases but ignore price increases, Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. homogeneous or differentiated products i. True or false: Firms in an oligopoly always produce a homogeneous product. Click the card to flip Definition 1 / 84 When members of an oligopoly react to price changes by a ____ _____ dominant firm, the model is most applicable. *To obtain lower input prices *increasing sales and output 6) Which one of the following characteristics applies to oligopolistic markets? C. The choices made by one firm have a significant effect on other firms. An oligopoly is a market structure that involves few producers and suppliers (www.oecd.org). So here we can see a one-way interdependence pattern. *To increase control over the product's price In third-degree price discrimination happens when customers are segregated by . A) kinked demand curve. b) through pricing Oligopolies exist and do not attract new rivals because A) of competition. Due to minimal competition, each of them influences the rest through their actions and decisions. *To obtain lower input prices a) Import competition Strategic independence. B) in a single-play game but not a repeated game. 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. The concentration ratio is a tool that measures the market share leading companies have in an industry. Updated: Aug 16, 2022. command economy, economic system in which the means of production are publicly owned and economic activity is controlled by a central authority that assigns quantitative production goals and allots raw materials to productive enterprises. 6) Wal-Mart follows the kinked demand curve model of oligopoly. D) is not; to comply when the other firm complies and to cheat when the other firm cheats Non-Collusive Oligopoly-Sweezy's Kinked Demand Curve Model (Price-Rigidity) Usually, in Oligopolistic markets, there are many price rigidities. c) Kinked-supply curve model d) Its marginal revenue curve would consist of two segments, d) Its marginal revenue curve would consist of two segments a) The possibility of price wars diminishes and profits are maximized. c) They lose most of their excess-production capability. b) strengthens Oligopolyis a market structure D) Bud has a dominant strategy but Miller does not. d. 2. . C) if Jane does not change her decision, Bob would like to change his. C) 2. The financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. b) neither productive efficiency nor allocative efficiency Mutual interdependence solely means that they base their decisions on how they think their rivals will react. c) Dominant firms What is oligopoly and its characteristics? 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]. If a firm assumes that its rivals will match all price changes, but the firm's rivals actually charge a lower price what are the potential consequences? Each firm is so large that its actions affect market conditions. a) It could be downward or upward sloping. The value denotesthe marginalrevenue gained. B) both prisoners deny. a) pricing theory A) suggests that price will remain constant even with fluctuations in demand. b) OPEC B) "I am producing more widgets than Wally and I agreed to in our talk last week." Economics questions and answers. C. Some market power. Characteristics: There are few firms in the market serving many consumers. La renta de la tierra de primera calidad ser siempre superior a la renta de la tierra de segunda categora. believes that DTRs debt to equity ratio of 1.6 is probably the minimum that lenders will accept. Share with Email, opens mail client A study based on over 9,0009,0009,000 U. S. residents a) price changes occur slowly A) equilibrium price and quantity will be sensitive to small cost changes. 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 . Barriers to entry into an oligopoly most resemble those of a ______. 5.3.5 Apply Concepts of Oligopoly and Oligopoly Models .pdf. a) low to receive a payout of $15 c) horizontal or perfectly elastic C) "Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company." Oligopolies are typically composed of a few large firms. Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. We are dedicated to providing you with the very best in economics knowledge, with an emphasis on microeconomics and macroeconomics. In these characteristics, manufacturers usually only produce and sell one product. 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. 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. There are just several sellers who control all or most of the sales in the industry. A) all members of the cartel have a strong incentive to abide by the agreed-upon price. Its main characteristics are discussed as follows: 1. Which one of the following observations is correct? A duopoly is a) purely competitive market a) its rivals do not respond to either a price cut or price increase C) "If only Wally and I could agree on a higher price, we could make more profits." You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. O B. E) None of the above. What are the positive effects of large oligopolists advertising? It is calculated by dividing the change in the costs by the change in quantity.read 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. For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly. This market structure can be competitive and sometimes less competitive. A small number of sellers. C) assumes that marginal revenue equals marginal cost only at the quantity at the "kink." A market is deemed oligopolistic or extremely concentrated when it is shared between a few common companies. Question: Which of the following is NOT a characteristic of an oligopoly? Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. c) Nash equilibrium We reviewed their content and use your feedback to keep the quality high. C. Some market power. Oligopolistic firms do which of the following when they change their pricing strategies? Four characteristics of an oligopoly industry are: Few sellers. Therefore, necessarily they tend to react. Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making. This has been a Guide to Oligopoly and its definition. d) It will always be U-shaped. a) are always more efficient Business Economics Consider a Cournot oligopoly with n = 2 firms. 2) In the dominant firm model of oligopoly, the larger firm acts like *The firm's demand curve will shift further to the left. Here we discuss how does Oligopoly market work in economics along with its characteristics. The need to spend a huge amount of money on name recognition and market reputation may discourage entry by new firms. E) Each firm has an incentive to cheat. D) firms in perfect competition. Because of this, every firm takes decisions very carefully by considering the possible reactions of the rival firms. 3) Canada's anti-combine law is enforced by 13) A tit-for-tat strategy can be used Marilyn Cox is the office manager for DTR Inc. DTR constructs, owns, and manages apartment The firms produce differentiated products. Advertising benefits society by ______. a) The same as monopolistic competition Product differentiation refers to making a product look attractive and different from other products in the same class. E) both are price takers. Features: Many and small sellers, so that no one can affect the market What kind of game is it if the firms must choose their pricing strategies at the same time? c) Its marginal cost curve is made up of two segments *Prohibit the entry of new rivals, *Reduce uncertainty d) import competition, Suppose the rivals of an oligopolistic firm match either a price increase or decrease. b) are less efficient because they are often regulated by the government a) are less efficient due to competition Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. E) Bud and Miller each have a dominant strategy. c) Dominant firms Oligopoly is a market with a few firms and in which a market is highly concentrated. d) are more efficient because cartels and collusion is always successful Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity Welcome to EconTips, your number one source for all things about economics. Which statement is true about oligopolies? 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? c) sales of the largest firms in an industry D) 2,750. 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 ______. d) They do not achieve allocative efficiency because their price exceeds marginal cost. Established firms in the market may take strategic actions to prevent new entries. b) The number of employees in an industry who ever have or are currently working for one of the four largest firms Demand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. *It lowers search costs of information for consumers. It helps avoid the potential price war and price rigidity. Cost of firm A is lower than firm B Profit maximizing price and quantity of firm A is PA and XA respectively. 14) The kinked demand curve model c) its rivals ignore price increases and price decreases d) Mutual interdependence. issued for the land? (Pure) Monopoly 3. b) greater than or equal to 50% It is assumed that all of the sellers sellidentical or homogenous products. C) lower the price of their products. Libertyville has two optometrists, Dr. Smith and Dr. Jones. 9) In the dominant firm model of oligopoly, the dominant firm faces a C) a perfectly competitive market. If the products of the firms are differentiated the degree of interdependence is then weakened. The policy implementation process has not taken in to account the life of rural peasants living in vicinity of cities. Answer: An oligopoly is an industry which is dominated by a few firms. 10) In the dominant firm model of oligopoly, the dominant firm produces the quantity at which marginal revenue equals Thus, each firm gains a considerable market share with minimal potential profits. A) Each firm faces a downward-sloping demand curve. b) kinked demand D. Th; Which of the following is a characteristic of an oligopoly market structure? Oligopolists do not stress competing with each other on the pricing front. b) Collusive pricing model 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. 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. a) major firms in an industry ranked by employment a) They move downward and to the right to a lower operating point on the average-total-cost curve. a) Its demand curve is downward-sloping A) rules from chapter 12 ^-^, What is the only stable outcome in a payoff matrix? b) Interindustry competition Marginal revenue = Change in total revenue/Change in quantity sold. A) "Gas prices in this town always go up and down together." What are the 4 characteristics of oligopoly? Meanwhile, all firms know that their decisions affect other firms sales and profit, hence they necessarily react against those decisions. 13) Complete the following sentence. 1. D) There is more than one firm in the industry. B) unit elastic. e) It could be downward sloping or kinked. In December, General Motors produced 6,600 customized vans at its plant in Detroit. Here, they focus on each other and try to exceed customer expectations in every possible way. That means higher the price, lower the demand. As their products seem visually identical, both the brands have to make sure they offer customers something that the other does not. b) pure monopoly C) the same as a monopoly. 12) Which one of the following quotations best describes the kinked demand curve model of oliogopoly? A) oligopolists. single family housing and would be an attractive site for single family homes. Raised barriers to entry, price-making power, non-price competition, the interdependence of firms, and product differentiation are alloligopoly characteristics. A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ______. a) L-shaped b) flexible 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. D) if Bob does not change his decision, Jane would like to change hers. c) high to receive a payout of $12 8) Which of the following quotes shows a contestable market in the widget industry? However, DTR does not intend to build any single family homes. b) increasing monopoly power *The game would eventually end in the Nash equilibrium (cell A). b) high to receive a payout of $15 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. The competing firms are few in number but each one is large enough so as to be able to control the total industry output and a moderate. b) They achieve productive efficiency because their marginal revenue equals marginal cost. a) The outcomes for all firms are negative. Which of the following is characteristic of oligopoly, but not of monopolistic competition? c) losses; prices; increase, What is it called when a group of producers creates a formal written agreement stating the level of output by each firm and the prices that must be charged? *Large capital investment What does a demand curve look like for an oligopolistic firm? A(n) _______ (Enter one word) is a market dominated by a few large producers of a homogeneous or differentiated product. d) ow to receive a payout of $12 B) revenues, elasticity, profit, and payoffs. ADVERTISEMENTS: This fact is recognized by all the firms in an oligopolistic industry. The number of suppliers in a market defines the market structure.
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