B) neither player would be willing to change his or her decision unless the other player also changes his or her decision. Each firm is so large that its actions affect market conditions. If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs 5.3.5 Apply Concepts of Oligopoly and Oligopoly Models .pdf. d) ow to receive a payout of $12 But the other firms act considering the interdependence. And that is what turns out to be the unique selling proposition (USP) of the respective brands in the oligopolistic industry. And rest of the businesses or minor players follow the same. b) Collusive pricing model However, too much price decrease can lead to a price warPrice WarA 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. Perfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. d) strategic theory. The amount of time (in seconds) needed to complete a critical task on an assembly line was measured for a sample of 50 assemblies. b) Mutual interdependence For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly. For a particular industry there may be a low four-firm concentration ratio since it is measured on a nationwide scale, but there can still be a local oligopoly. Therefore, necessarily they tend to react. If one of the firms cheats on this agreement, what will happen? D) Bob denies and Art confesses. True or false: A one-time game occurs when firms will choose their pricing strategy for today without concern about future interactions with their rivals. A) specify the technology of production. 8) 8)Which is not a characteristic of oligopoly? Which of the following is not a characteristic of an oligopoly? Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it. 16) A monopolistically competitive firm is like an oligopolistic firm insofar as A) both face perfectly elastic demand. D) the four-firm concentration ratio for the industry is small. Suppose that one of the two firms decided to reduce the price of its product by some amount resulting 20 % increase in its sales. An oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing. e) low to receive a payout of $8. B) unit elastic. So here we can see a one-way interdependence pattern. D) monopolistic competition. d) straight and steep d) The advertising model, To reduce uncertainty or increase profits, oligopolists may change their prices ______. They do it strategically so they do not lose their customers in what could be a price war. *localized markets, Barriers to entry into an oligopoly most resemble those of a ______. *Reduce inputs used in production In an oligopoly, dominant market players are influential enough to decide on the price of products and services. 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. C) 2. found that the most prevalent disorder was B) assumes marginal cost is constant. On the other hand, if an oligopolist reduces output by raising prices, the rest refrain from doing so. b) Its demand curve is downward-sloping D) "I have been spending extra on research and development of my new two-way widget." The presidents friend constructs and sells single family homes. The market share of the firms is unequal. Demand and cost differences, the number of firms in the industry, and the potential for cheating all represent _____ (one word) to collusion. *Ownership and control of raw materials Demand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. a) The outcomes for all firms are negative. C) lower the price of their products. 41) Refer to Table 15.3.12. a) major firms in an industry ranked by employment (Pure) Monopoly 3. read more curve results in a convex bend, known as kink. It is an essential component of marketing strategy leading to brand recognition and business growth. *increasing economies of scale, *providing misleading information document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . D) payoffs Which scenario describes a simultaneous game? See more documents like . c) Nash equilibrium a) Import competition Pure (Perfect) Competition 2. Based on the figure, if one firm cheats on the collusive agreement it can increase its payoff by Libertyville has two optometrists, Dr. Smith and Dr. Jones. 31) Refer to Table 15.3.7. a) purely competitive market A) each firm can act like a monopoly. A) Dr. Smith advertises no matter what Dr. Jones does. a) They may produce homogeneous or differentiated products. 36) Refer to Table 15.3.10. D) firms in perfect competition. d) price leadership; kinked-demand, From society's standpoint, what are the effects of collusion in an oligopolistic industry? Besides, high capital requirements, licensing, patents, market demand, economies of scale, limit-pricing, and customer loyalty restrict the entry of new businesses. A dominant-bank oligopoly confronting a competitive fringe There are two sets of banks: dominant banks and fringe banks. A) price. a) Demand is highly elastic below the going price A) a market where three dominant firms collude to decide the profit-maximizing price. 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) specify how marginal cost is determined. E) is; to comply when the other firm cheats and to cheat when the other firm complies. A) Strategic Independence What kind of game is it when firms choose their optimal pricing strategy today without worrying about possible interactions in the future? 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? a) payoff It determines the law of demand i.e. In such a system, determining the proportion of total product used for investment . Which of the following is characteristic of oligopoly, but not of monopolistic competition? C) independence of firms. 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. 8) A weakness of the kinked demand curve theory of oligopoly is that it does not 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. Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. 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? E) rivalry of the participants leads to the worst solution from their point of view. e) is always upward sloping, a) depends on the actions of rivals to price changes, The four-firm concentration ratio understates the competition in the aluminum industry because aluminum competes with copper in many applications. A)Each firm faces a downward -sloping demand curve. A) 0. d) By updating manufacturing equipment, What is the four-firm concentration ratio? they will make more pricing low than if they both price high. xxx\underline{\phantom{\text{xxx}}}xxx. E) A and C. 8) A merger is unlikely to be approved if ________. d) does not influence. It also means that each firm must be aware of the reaction of others to their actions. read more rather than lower prices to gain profits and market share. $1. *Cause price wars during business recessions 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. b) price leadership; collusion b) Demand is highly elastic below the going price b) Interindustry competition 1. The characteristics of an oligopoly market or oligopolistic strategy are mentioned below: Interdependence . Keep its price constant and thus increase its market share B. Which one of the following is the most important reason? B) in a single-play game but not a repeated game. ), Oligopolists often compete through product development and advertising instead of price because ______. Oligopoly refers to a market situation or a type of market organisational in which a few firms control the supply of a commodity. D) specify how average cost is determined. 11) Once a cartel determines the profit-maximizing price, E) rules, strategies, payoffs, and outcome. ) D. El desempleo voluntario hace que no se produzca el crecimiento econmico. A) only Bob would like to change his decision. It encourages existing brands to improve product quality and originality by instilling a sense of rivalry. 8) Which of the following quotes shows a contestable market in the widget industry? d. 2. . Based on her experience with past negotiations, Marilyn knows that lenders are concerned about DTRs debt to equity D) neither is protected by high barriers to entry. Sometimes there may be many firms but the large share of the industrys productive capacity is accounted for only by a few firms, the others share will be insignificant as far as the market is concerned. The key characteristics of an oligopoly market structure include: Few firms : There are only a few firms in the market, which makes it easy for the firms to coordinate their behavior and to reach . Some of its fundamental characteristics include the existence of a small number of firms, differentiated or homogeneous products, and barriers to entry. *It enhances competition and reduces monopoly power. 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). What happens to oligopolistic firms when a recession occurs? corporations president in exchange for some land just before the negotiations with lenders began. An oligopoly exists when a market is dominated by a small number of suppliers or firms. 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. Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. Each firm faces a downward-sloping demand curve. b) Localized markets We can conclude that industry A is. 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. d) Its marginal revenue curve would consist of two segments, d) Its marginal revenue curve would consist of two segments If this game is nonrepeated, the Nash equilibrium is A) both firms cheat on the agreement. This has been a Guide to Oligopoly and its definition. b) high to receive a payout of $15 Instead, they collaborate on various fronts, such as economies of scaleEconomies Of ScaleEconomies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. B)Firms set prices. The labor productivity at this plant is known to have been 0.100.100.10 vans per labor-hour during that month. *The game would eventually end in the Nash equilibrium (cell B or C). 7) Why might only a few firms dominate an oligopolistic industry? A) a firm in an oligopoly market. Oligopolistic firms do which of the following when they change their pricing strategies? c) competition It continues to behave on the assumption that its new demand (d 1 d' 1 ) will not shift further because the effect of its own decisions on other sellers' demand would be negligible. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." Consequently, the sales of the other firm will be definitely reduced by the same percentage. It is used as one of the strategies to increase the business firm's revenue and increase the market share. 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) It will always be downward sloping because it is a price maker. c) By changing pricing strategies C) one prisoner has no chance to be acquitted since there is no other prisoner to support his testimony. Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. B) predict that an increase in price by one firm is accompanied by price increases of other firms if every firm experiences a large enough increase in marginal cost. 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. Wal-Mart's marginal cost of a flat panel TV has fallen, and as a result Wal-Mart will ________. B) is not; to comply when the other firm cheats and to cheat when the other firm complies b) pure monopoly E) unknown. Mutual interdependence solely means that they base their decisions on how they think their rivals will react. D) Gear cheats, while Trick complies with the agreement. c) dominant firms c) price leadership a) Kinked-demand curve model b) demand; losses; increase It is the most important feature of an oligopolistic market. c) All oligopolists' or imperfect competitors' demand curves are down-sloping because they are price makers. land back or when DTRs debt to equity position improves, what should she do? C) the HHI for the industry is small. 1. 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. Each optometrist can choose to advertise his service or not. Furthermore, no restrictions apply in such markets, and there is no direct competition. B) This game has no Nash equilibrium. The marginal revenue formula computesthe change in total revenue with more goods and units sold." In December, General Motors produced 6,600 customized vans at its plant in Detroit. Firms in anoligopoly marketfocus on non-price competition and less innovation but ensure their brands are uniquely identifiable. B) collusion b) Lower prices, but greater output However, firm B will follow the leaders price and equilibrium quantity in order to avoid the uncertainty that can be arisen. If so, then the firm's demand curve will be ______. a) It could be downward or upward sloping. Strategic independence. Raised barriers to entry, price-making power, non-price competition, the interdependence of firms, and product differentiation are alloligopoly characteristics. In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. 6) Which one of the following characteristics applies to oligopolistic markets? 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 ______. 8) Firm X is competing in an oligopolistic industry. c) threatens a) over collusion 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. b) potential for mergers and acquisitions *It helps reduce demand for material products. Strategic independence. c) Its marginal cost curve is made up of two segments a) Affect profits and influence the profits of rival firms D) the industry is government regulated The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. Features: Many and small sellers, so that no one can affect the market bc it's similar to monopoly but has the difference of having more firms lol. B) it prevents or substantially lessens competition But in practice, there are several barriers to entre which make it quite difficult for the new firms to join the industry or market. Economies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. An oligopoly is a market state where there is a limited amount of competition available for consumers to consider. A game that is played more than once between rivals is a ____ (Enter one word) game. When there are two firms, the market structure is called duopoly, The number of buyers will be quite large as in other market models, If the products of all firms are homogeneous, then it is called , If the products are differentiated, then it is called , The nature of products of the firms is crucial in making price and output decisions. A market is deemed oligopolistic or extremely concentrated when it is shared between a few common companies. Why is collusion desirable to oligopolistic firms? A) Each firm faces a downward-sloping demand curve. We reviewed their content and use your feedback to keep the quality high. Course Hero is not sponsored or endorsed by any college or university. *price elasticity of demand marginal cost pricing The joining of firms that are producing or selling a similar product is a horizontal merger Suppose an industry has total sales of $25 million per year. 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. *To increase economies of scale, *To increase market share In doing so, they reduce production and increase prices, a phenomenon called collusion. However, at this price profit of firm B is not maximized. Economics questions and answers. a) low to receive a payout of $15 B) both can earn an economic profit in the long run. b. *The firm's demand curve will shift further to the right. Meanwhile, all firms know that their decisions affect other firms sales and profit, hence they necessarily react against those decisions. E) Firms set prices. d) easier. E) cheat on each other. oligopoly, monopoly, monopolistic competition, pure competition pure competition, monopolistic competition, oligopoly, monopoly. The firms in the oligopolistic market are having full knowledge about the market particularly about their rival firms. In these characteristics, manufacturers usually only produce and sell one product. The distinctive feature of an oligopoly is interdependence. A(n) _______ (Enter one word) is a market dominated by a few large producers of a homogeneous or differentiated product. B) the firms may legally form a cartel. Nokia, however, offers Android phones with the same features and almost similar prices. e) Firms may sell a differentiated product. a) depends on the actions of rivals to price changes D) There is more than one firm in the industry. Oligopoly characteristics include high barriers to new entry, price-setting ability, the interdependence of firms, maximized revenues, product differentiation, and non-price competition. Oligopolies exist and do not attract new rivals because A) of competition. c) Blue jean designer b) upward-sloping E) a cartel. E) only when there is no Nash equilibrium. D) Consumers will eventually decide not to buy the cartel's output. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. Advertising benefits society by ______. 1) In the dominant firm model of oligopoly, the smaller firms behave as A) is; to comply regardless of the other firm's choice Which of the following is not a characteristic of oligopoly? a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and . The distinctive feature of an oligopoly is interdependence. (Figure) summarizes the characteristics of each of these market structures. D) Bud has a dominant strategy but Miller does not. *providing misleading information 16) The firms Trick and Gear form a cartel to collude to maximize profit. d) its rivals match both a price cut and price increase, b) its rivals match a price cut but ignore a price increase, When members of an oligopoly meet to set prices to maximize profits it demonstrates the ______ and/or the ______ model. It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more.
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