Key characteristics of Oligopoly market.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Problem 2. If the consumer preference can be represented by a CES function with δ = 0.5, i.e. u(x, y) = x0.5 + y0.5. Let the prices and income be (px, py, w). 1. Set up the Lagrangian expression.2. Take the first-order conditions.3. Substitute into budget constraint to derive the optimal consumption bundles.

1. A town relies on four different sources for its non-drinking water needs: dam water, reclaimed water, rain water, and desalinated water. The different sources carry different risks and costs. For instance, desalinated water is fully reliable due to abundant sea water, but it is more expensive than other options. Reclaimed water also has relatively lower risk than rain or dam water since a certain amount can be obtained, even during the dry. season, by the treatment of daily generated waste water. Using any of the four options requires an investment in that resource. The return on a particular water source is defined as the amount of water generated by the source per dollar of investment in it. The expected returns and standard deviations of those returns for the four water sources are described in the following table: Water resource Expected return St. Deviation Dam water 2.7481 0.2732 Reclaimed water 1.6005 0.0330 Rain water 0.5477 0.2865 Desalinated water 0.3277 0.0000 Higher…

1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

Answer 2

Question

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Answer 6

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Answer 7

Chapter 26, Problem 26.1LO

To determine

Key characteristics of Oligopoly market.

Answer 8

Expert Solution & Answer

Explanation of Solution

Key characteristics of a Oligopoly Market

Few firms: There are a few firms in an oligopoly market. Oligopoly industry is dominated by a few large firms. The market share of these few firms is relatively large as compared to the market size. Thus these few firms have a substantial control over the market.
High Barrier of entry or exit: It is not easy for any firm to enter or exit this industry. The barrier of entry or exit is high. Barriers are created in forms of patents and copyrights, government restrictions or huge start up costs. Because of high barriers, firms cannot easily enter or exit the market. Thus the existing firms have a huge control on the market.
Interdependence: The firms are highly interdependent. One firm’s decisions depends on another firm. As a group of firms have a substantial share of the market, so the decision of each firm have an impact on the rival firm. It provokes a countermove from the rival.
Differentiated Product: The firms sell differentiated products which are similar to each other but not identical. They are not perfect substitutes. Each product is slightly different from each other. This is known as product differentiation. Each firm in monopolistic markets claims their product to be exclusive from the other. This gives them slight monopoly power and so they have a negatively sloped demand curve. Products are generally differentiated based on three categories.
Physical differences.
Perceived differences.
Differences in supports services.
Advertisement: It is a big instrument in the hand of an oligopoly firm. They use it as a tool against the rival firm. An oligopoly firm under oligopoly does aggressive advertising with the objective of taking into custody a large part of the market.
Group Behavior: They may have a formal or informal group of firms. They have one firm as the leader firm and others as the followers. They form the group by a formal agreement between the groups of producers, to control the price of the product. The goal of the group is to maximize collective profit.
Price Rigidity: Oligopoly firms have to stick to their own price. If one firm tries to reduce their price, the rival firm may respond by an even higher reduction in the price level. On the other hand, if a firm tries to increase its price, the rival firm may not respond to it at all.
Kinky demand curve: Because of the stickiness of the price, the oligopolists are faced with kinked demand curve. Actually the oligopoly firm faces two demand curves. A relatively inelastic demand curve for low prices and a relatively elastic demand curve for the high prices. So the demand curve for the firm will have a kink at the intersection point of the two curves. If the firm tries to increase the price above the equilibrium level, the other firms will not follow. So the firm will face an elastic demand curve. When the price is reduced below equilibrium level, other firms will follow and thus faces a relatively inelastic demand curve.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Introduction:

Oligopoly Market: An oligopoly market structure is a market where a few firms sell similar but differentiated products. But the special feature is that only a few firms hold the major market share. Oligopoly market is said to be highly concentrated. They dominate the pricing strategy. They are the market leaders. Others are the followers.

Answer 12

Ch. 26 - Prob. 26.1LO Ch. 26 - Prob. 26.2LO Ch. 26 - Prob. 26.3LO Ch. 26 - Prob. 26.4LO Ch. 26 - Prob. 26.5LO Ch. 26 - Prob. aFCT Ch. 26 - Prob. bFCT Ch. 26 - Prob. cFCT Ch. 26 - Prob. dFCT Ch. 26 - Prob. 1CTQ

Key characteristics of Oligopoly market.

Key characteristics of Oligopoly market.

Explanation of Solution

Want to see more full solutions like this?

Chapter 26 Solutions