oligopoly

Question 1

state the 6 charcteristics

Answer 1

few firms dominate mkt
firms have differntiated goods
high bte/e
interdependence between firms
non price competition
profit max not always sole obj

Question 2

few frims dominate teh maket so describe the concetration ratio

Answer 2

high

Question 3

oligopoly is no more than x firms with collectivley around waht % of market share

Answer 3

7
70%

Question 4

casue firms have differntiated goods they are p

Answer 4

price makers

Question 5

theere are major bte give examples of these

Answer 5

high start up costs

sunk costs

brand loyalty

eos

Question 6

explain interdependence

Answer 6

firms make choices and descision based on actions and reactions of rival firm

therfore we see price rigifity
as not much comp on price so tend to be sticky and rigis

Question 7

explain why non price competition is signficant

Answer 7

means prices tend to be sticky and rigid

competition is more based on branding adv , quality of p/s

Question 8

explain why we dont know sole obj of firms and why prof ma xx may not always be sole obj

Answer 8

oligopolies are like dog fights for market share

firms are very close to having contorl ofd the market - similar ot a monopoly

so anything they can do to give htem that power measn they will

so if prof max yes

but if other obj better they will pursue that instead

Question 9

cuase we dont know what obj of oligopoies is referring to teh mcq

the behaviour of firms is

Answer 9

unpredictable

Question 10

gove me gloabl oligopoly examples

Answer 10

soft drink

car inddustry

Question 11

give me uk oligopoly eaples

Answer 11

supermakret , energy mkt

bus mkt

airline mkt - short haul and long haul

Question 12

draw the kinked demand currve to show interdependce and gives us conlusion of price rigiidty

Answer 12

draw elastic curve

stop

draw inleastic cirve

label this

point in between them draw p1 and q1

price costs revenue - y axis
quantity - x axis

Question 13

firms dont want to chnge price why

Answer 13

price settled at p1

above this price is elastic

below this price is inelastic

so no sense to change price
- if raise to p2 qd decreases more than proportionatley to increase in price , cause moved onto elastic part of demand curve

Question 14

why wont firms follow rise in orice

Answer 14

looking to gain market share so keep price of p1 annd undercut the firm

firm that raise prices loose customers to riva

Question 15

why will the firm that raises the price suffer

Answer 15

all other firms will keep price at p1

qd has dropped significantly as a result market share and total revenue have decreased

Question 16

why wont firm drop price to p3

Answer 16

although demand increases from q1 - q3 it is proprotionaltley less than reduction in price becuasefirm has moved onto inelastic section of demand curve

other firms are going to follow looking to protect makret share - a price war will occur

firms will see drops in totoal revenue as demand is inelastic