CH 21 Oligopoly

Question 1

What is an Oligopoly?

Answer 1

A market dominated by a few large firms

Question 2

What are the features of an Oligopoly?

Answer 2

-Few large firms dominate
-Products sold are close substitutes to each other
- High barriers to entry
-Collusion might take place
-Non price and price competition

Question 3

What is collusion?

Answer 3

Informal agreements between firms to restrict compeition

Question 4

What is non price competition?

Answer 4

Instead of competing with price, they compete using vouchers and promotions

Question 5

What are price wars?

Answer 5

When one firm in an industry lowers their prices causing all other firms to do the same

Question 6

What are the advantages of an Oligopoly?

Answer 6

-More choice
-Better quality goods
-Firms enjoy Economies of scale
-Better innovation
-Consumers enjoy price wars

Question 7

What are the disadvantages of an Oligopoly?

Answer 7

-Fixing prices would lead to a lack of choice
-Chance of cartels existing
-Lower competition

Question 8

What is a cartel?

Answer 8

A group of firms or countries that join together and agree on pricing or output levels in the market