Oligopoly 3.4.4

Question 1

What are the key features of an oligopoly

Answer 1

Few large sellers
High Barriers to entry/exit
Differentiated goods
Interdependence

Question 2

Overt Collusion

Answer 2

A formal agreement between firms to collude

Question 3

Tacit Collusion

Answer 3

An unspoken agreement between firms to collude

Question 4

Define collusion

Answer 4

When firms agree to limit competition

Question 5

What are the 3 types of price competition

Answer 5

Price Wars
Predatory pricing
Limit pricing

Question 6

Define Price wars

Answer 6

When firms undercut each others prices to steal the other firms customers

Question 7

Define Predatory pricing

Answer 7

Setting price below AVC to force out other firms the market

Question 8

What is a firms SR shutdown point

Answer 8

AVC = AR

Question 9

Define limit pricing

Answer 9

Setting price so low it doesnt allow new firms to enter the market

Question 10

What are the 4 types of non-price competition

Answer 10

Advertising
Loyalty cards
Branding
Quality

Question 11

What do the impacts of oligopolies on consumers depend on

Answer 11

whether firms are competing or colluding

Question 12

Impacts of oligoplies on consumers when they are colluding

Answer 12

Higher prices
Lower Quality
Non-maximised consumer welfare

Question 13

Collusive Oligopolies in the long run are

Answer 13

Allocatively inefficient if high prices
Productively inefficient DOS or Min AC
Possibly X inefficient
Dynamically efficient
Allocatively efficient if prices close to MC
Productively efficient if Min AC