4.4-Oligopoly Flashcards
What is an oligopoly?
A market structure characterized by a small number of firms that dominate the market.
True or False: In an oligopoly, firms are interdependent.
True
Fill in the blank: Oligopolistic firms often engage in __________ to maximize their profits.
collusion
What is a key feature of oligopolies that distinguishes them from perfect competition?
The presence of a few large firms with significant market power.
Name one example of an oligopolistic market.
The automobile industry.
What is the ‘kinked demand curve’ model?
A model that suggests that firms in an oligopoly face a demand curve that is more elastic for price increases and less elastic for price decreases.
True or False: Price wars are common in oligopolistic markets.
False
What is ‘price leadership’ in oligopolies?
A situation where one leading firm sets the price, and other firms follow.
What does ‘non-price competition’ refer to?
Strategies used by firms to attract customers without changing prices, such as advertising and product differentiation.
Fill in the blank: Oligopolists may form __________ to reduce competition.
cartels
What is the significance of barriers to entry in an oligopoly?
They prevent new firms from entering the market and increase the power of existing firms.
True or False: Oligopolistic firms always compete on price.
False
What is the ‘Cournot model’?
An oligopoly model where firms choose quantities to produce simultaneously.
What does ‘game theory’ analyze in the context of oligopolies?
The strategic interactions between firms and how they anticipate each other’s actions.
Fill in the blank: Firms in an oligopoly may use __________ to signal their intentions to competitors.
tacit collusion
What is the ‘Stackelberg model’?
An oligopoly model where one firm sets its output first, and other firms follow.
True or False: Oligopolies are always beneficial for consumers.
False
What is ‘product differentiation’?
The process of distinguishing a product from others in the market to make it more attractive.
What role does advertising play in oligopolistic markets?
It helps firms to differentiate their products and maintain market share.
Fill in the blank: A __________ occurs when firms agree to set prices or output levels together.
collusive agreement
What is ‘price rigidity’ in oligopolies?
The tendency of prices to remain stable despite changes in demand or costs.
True or False: Oligopolies can lead to higher prices for consumers.
True
What is ‘limit pricing’?
A strategy where established firms set prices low enough to deter new entrants.
What does ‘monopolistic competition’ differ from oligopoly?
Monopolistic competition has many firms, while oligopoly has few.
