oligopoly

Question 1

what are the characteristics of an oligopoly?

Answer 1

few dominant firms
interdependence
high barriers to entry
non price competition

Question 2

Overt collusion

Answer 2

Between firms - set market price - to make large profits

Question 3

Tacit collusion

Answer 3

There’s no formal collusion - unspoken - minimise competition

Question 4

what are the characteristics for a collusive market

Answer 4

small n.o firms
poor regulation for collusion - competition policy is poor
high barriers
firms have similar costs

Question 5

What are price wars

Answer 5

when firms drive prices downwards to gain market share

Question 6

What is predatory pricing

Answer 6

established firms setting low prices - lower than smaller firms costs - so they cannot enter the market

Question 7

What is limiting pricing

Answer 7

setting low prices to prevent firms from entering

Question 8

What happens if you increase prices on the kinked demand curve

Answer 8

Price Elastic demand - fall in quantity
other firms wont follow
loss of revenue and market share

Question 9

what happens if you decrease prices on the kinked demand curve

Answer 9

Price Inelastic demand :
other firms will also decrease price
no change in market share and a fall in revenue

Question 10

What is price rigidity

Answer 10

when prices are kept the same because a change to the price would have adverse effects

Question 11

what is an oligopoly

Answer 11

market structure where a few dominant firms hold most of the market share.