Please read chapter 10 and answer the following questions:
1. (Varieties of Oligopolies) do the firms in an oligopoly act independently or interdependently? Explain your answer.
2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly? * Price leadership practices violate US anti-trust laws. * The more differentiated the product is, the less effective price leadership is as a means of collusion. * There is no guarantee firms will follow the leader forcing the leading firm to reduce prices. * Cheating may occur. * A new entry can destabilize the price leader's position…
-If a price leader in an oligopolistic market sets price and output in order
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If both students sign the statement, each will receive an “F” for the course. If only one signs, he is allowed to withdraw from the course while the other student is expelled. If neither signs, both receive a “C” since the professor does not have sufficient evidence to prove cheating. Which outcome do you expect? Why?
* Prisoners’ Dilemma…
* In this case, both students will probably confess if they’re coherent about life. Why? Because each Student gets a better payoff by confessing no matter what the other the student does. Student #1 thinks, “I don’t know what student # 2 is going to do, so if I confess it’s the best way to keep myself from getting expelled. If he keeps quiet, I get a “C”. Yet if he confesses, I get expelled instead of receiving an “F” for the course.” In other words, confessing is the only way to keep the other Student from being able to get me expelled.
5.(Market Structures) Determine whether each of the following is a characteristic of perfect competition, monopolistic competition, oligopoly, and/or monopoly:
a. A large number of sellers /… Perfect competition
b. Product is a commodity…/ Government Monopoly (Utility)
c. Advertising by firms…/ Oligopoly
d. Barriers to entry… / Monopoly
e. Firms that are price makers…/a monopoly is a price maker as it holds a large amount of power over the price it charges.
6. OPEC is the
In Document 4 “A Call to Action,” by James B. Weaver, it explained to the public through the author's thoughts of that monopolies had too much power and that the monopolies destroy competition and trade. This book was written at the time of when big corporations were taking over and destroying competition. Also, the author goes into detail that they control the price of the raw material, so they can produce their products at a low price and sell it at a low price. By selling that the lowest price, the competitors can not compete are driven out of business or reduce the wages of the workers. This idea can be related to current times were big corporations, such as Walmart, are destroying competition because they lower their prices that the competitors cannot compete with.
1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an
A major feature of an oligopoly market is that any singular firm has the power to set market prices. This is evident in the example of Coles and Woolworths in Australia as they dominate the market share with 72.5%. Due to there only being a small number of firms, they are able to set their prices and change price and
12 (TCO 3) Identify the primary characteristics of monopolistic competition and oligopoly. Give examples of each.
(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.
There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for
The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.
In a perfectly competitive market each firm is a “Price Taker” , i.e. the prices and wages are determined by the market and the firm is so small relative to the size of the market that they can have no influence over the market price. For a market to be
In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.
pricing closely, as being out of step with the market can cause dramatic market share changes in a
“An observation made of oligopolistic business behaviour in which one company, usually the dominant competitor among
Perfect competition: in this competition, no participant dominates the market thus; no specific seller has the power to set the prices of homogeneous goods. This therefore makes the conditions of a perfect competitive market stricter than the rest of the market structures. In this market, AT&T should be willing to sell their services in a certain price that reciprocates to their demand to maximize profits.
Competition within the industry as well as market supply and demand conditions set the price of products sold.
b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.