11) For the Oligopoly Market Structure a) List and explain the characteristics o
ID: 1205033 • Letter: 1
Question
11) For the Oligopoly Market Structure
a) List and explain the characteristics of oligopoly and compare them to the characteristics of the other 3 market structures.
i) The oligopoly market structure is one of the most significant types in our economy. Please discuss the oligopoly market structure, and list and explain the characteristics.
b) List and explain the conditions under which the Oligopolistic firm achieves profit maximization and loss minimization. Be thorough.
i) Using the MR MC approach, discuss how to determine when the oligopolistic firm maximizes profit or minimizes loss in the kinked demand curve model.
c) You work for a firm that is a member of an oligopoly market.
i) Explain the issues of collusion.
(1) Here you should discuss the role collusion (in its various types) and how the firm might deal with the issue.
ii) Explain game theory and how the firm might use this tool to achieve its business goals
Explanation / Answer
First question 11(a) is answered below.
Kindly ask rest questions in another post.
An oligopoly is a type of market structure consisting of a few number of sellers (which are copletely aware of the actions of each other) selling to a large number of buyers. They operate for the purpose of profit maximization and there are high entry/exit barriers to keep competition at bay. They earn supernormal profits in the short as well as long run and they compete among themselves not only on the basis of price, but also other wayes like advertising etc.
Monopolistic competition is generally referred to as a mixture of pure competition and monopoly. It consists of many sellers selling to many buyers, but differentiated products. The products are not completely substitutable with each other as they differ in ingredients, service type, packaging, advertising etc. They operate with the purpose of profit maximization and set prices at the point MR=MC. They have few entry/exit barriers and earn zero economic profits in the lnog run.
Coming to PC and monopoly, a perfectly competitive market consists of many sellers selling to many buyers the same product at same market price. Firms have 0 market power and operate for welfare maxmization by setting P=MC. Firms earn zero economic profits in both short and long run. Also, there are no entry/exit barriers.
A monopoly firm is the single most seller in the market selling a product (not easily substitutable) to a large number of buyers. The firm makes high barriers to entry so as to avoid competition. It has complete control over the market and operates for profit maximization purpose by setting MR=MC
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