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Oligopoly
An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high, firms within an oligopoly produce branded products and there are also barriers to entry. There are collusive and non-collusive oligopolies.
327 Questions
How is an oligopoly different from monopoly?
- AR=MR
- normal profits in the long run
- large number of sellers
- free entry and excit ,as there are no barriers
- the seller is only the price taker
- perfectly elastic
- each firm is a part of the industry
Why are so many familiar industries oligopolies?
It depends on the type of monopoly.
The local power company is a monopoly. It is a monopoly because the government only allows one company of its type. Otherwise, rival companies would have to use their own poles and equipment, and it would be confusing since you would not know who to call when the lines are down. Likewise, there is only one public mail service, though there are private couriers and package services. Government offices are monopolies by their nature.
Sometimes a monopoly exists because the product is something rarely used and nobody else wants to compete or provide alternatives.
Sometimes monopolies occur because rivals go out of business. Others may run them out of business, or they may be subject to natural disasters and poor management.
Some monopolies are deliberately designed through practices such as "lock-in" and planned obsolescence of products. For instance, lets suppose you produce an operating system. You can plan for it to have a limited life. But you create brand loyalty and introduce incompatibilities with competitors' products. So the users, if they want to keep the software they already bought, they must stick with your operating system. You could even require manufacturers to create hardware what will only work with your software. So if the user doesn't want to replace the device, they must stay with your operating system. You could even use legal barriers such as patent suits to keep competition out of your market.
There are also anti-competitive practices that are used to help create monopolies. Here are some common ones:
Absorption of competitors or competing technologies -That is when a large company absorbs smaller companies which may become competitors or which have a new technology that poses a threat.
Dumping - That means flooding the market with low priced items. Sure, that hurts all the businesses that sell such products, even your own, but if you have more wealth than the competitors, your business can recover, while theirs likely will not. Once your competitors are gone, then you are free to charge whatever you want.
Excessive government regulations - That insures that only wealthy businesses of whatever type can stay in business. Often, predominant companies in an industry are the ones lobbying for the regulations.
Exclusive dealing - If the suppliers for parts will only supply to one company, then it would be difficult to make competing products.
Government subsidies - A company that is not profitable can have an unfair advantage over companies that need to make a profit if someone else is paying for the company to stay in business.
Intellectual properties misuse - This includes abuse of patent and copyright laws.
Refusal to deal - If you want to run someone out of business, you could get multiple large companies to refuse to do business with them.
Territory division - Two or more companies agree among themselves who can sell what items.
Tying - That is where unrelated products must be purchased together. That is why a software giant ran into problems with bundling a web browser for their OS. That way, other companies could not profit as much from selling web browsers, since they rendered 3rd party browsers unnecessary.
Compare the quantity and price of an oligopoly to those of a competitive market?
At profit maximization, marginal cost equals marginal revenue. Price will be higher than marginal cost.
What role did France play in World War 1?
Entered in war along the United Kingdom and stopped German troops on the western front. France, United Kingdom and other allies fought for years until the Americans arrived and helped greatly to end the war faster.
Why would the music industry be an example of an oligopoly?
The music industry is dominated by a few large firms which dominate the market, thus enabling the industry to exert its market influence. They also partake in collusion to ensure that barriers to entry into the music industry remain high for new firms to enter. The characteristics of an oligopoly are as follows:
Few, large number of firms dominate the market.
High barriers to entry
Long run abnormal profits
Price makers- have the ability to determine market price.
Maximise profits where MC=MR.
The music industry fits into the above characteristics and therefore is considered to be an oligopoly.
Is the restaurant industry oligopoly?
The fast-food industry itself is an oligopolistic market, but it operates under the monopolistic competitive market of restaurants in general.
What best describes a situation where oligopoly exists?
When many producers are selling slightly differentiated products is a situation where monopolistic competition exists.
Generally, collusion occurs when participating firms can increase their short-run economic profits by controlling supply, acting like a monopoly.
What method does OPEC use to increase is profits?
OPEC controls the oil but oil companies control the price. The oil compnies contention is that if OPEC releases 100,000 barrels of oil it is worth 5 times the amount if OPEC released 500,000 barrels. Do not get me wrong, always follow the profit reports. Big oil sets the price on a fake demand.
What 13 countries are OPEC members?
The member countries in OPEC are:
* Algeria * Angola * Ecuador * Iran
* Iraq * Kuwait * Libya * Nigeria * Qatar * Saudi Arabia * UAE * Venezuela
How much control does an oligopoly have over price?
faces a demand curve that is inelastic throughout the range of market demand.
faces a perfectly inelastic demand curve.
is a price maker.
is also able to dictate the quantity purchased
The short answer is no.
The OPEC Member Countries are:
- Algeria
- Angola
- Ecuador
- Iran
- Iraq
- Kuwait
- Libya
- Nigeria
- Qatar
- Saudi Arabia
- United Arab Emirates
- Venezuela
Which countries are part od OPEC?
The OPEC Member Counties are:
Algeria
Angola
Ecuador
Iran
Iraq
Kuwait
Libya
Nigeria
Qatar
Saudi Arabia
United Arab Emirates
Venezuela
How many barrels of oil produced each year by OPEC?
OPEC does not produce oil/oil products, it is a governing agency. OPEC is a permanent intergovernmental organization of 12 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries.
What is the definition of collusive oligopoly?
Collusive oligopoly is an industry that only contains few producers (oligopoly), in which producers agree among one another as to pricing of output and allocation of output markets among themselves. Cartel, such as OPEC, are collusive oligopolies.
What is an example of oligopoly?
The question reference the incidence of oligarchs. Oligarchs are essentially king-pins which can singularly dominate entire industries and economies. Oligarchy is often used to describe the economic takeovers by a handful of men of Russia in the early 1990s to the present. An example of Oligopoly was Russia's Gazprom under Mikhail Khodorkhovsky. Individual oligarchs include Roman Abramovich, Alisher Usmanov, and the exiled Vladimir Gusinsky and Boris Berezovsky.
What is the best situation where an oligopoly exists?
A small number of producers command nearly the entire market for a certain good of service
Why firms choose non-price competition over price competition?
Imperfectly competitive firms engage in none-price competition (like advertisement).
For example, in monopolistic competition, each firm has their own customers(by establishing some consumer loyalty), modest change in the output price of any single firm has no perceptible influence on the sales of any other firm, i.e one firm can raise price without losing all customers. Therefore, price competition makes no sense.
Oligopoly, because it has other similar, large competitors, such as Costco, Wal-Mart, and Kmart.
What happened on the 32nd OPEC Conference?
The formation of the Organization of Petroleum Exporting Countries (OPEC) occurred in September of 1960 at the Baghdad Conference, It was created by five countries which included Kuwait, Venezuela, Iran, Iraq, and Saudi Arabia. As of 2014, there are 12 member countries. OPEC's goal was to have more control over oil prices and their petroleum resources.
What is the difference between cartel and oligopoly?
Monoply is a situation in which a single person or individual or a business dictates the whole system and people are dependent only on that single individual or business.
While cartel is a situation where a group of businesses or companies work hand in hand instead of competing with each other to benefit themselves and not the consumer.In both conditions the consumer is the looser.
Why the demand curve in an oligopoly is kinked?
because oligopolistic firms are unlikely to benefit from a reduction in prices, it is something known as game theory, each firm is attempting to get the edge over their competitor, but not with prices. This is because if one firm reduces their prices, it is highly likely that the others will do the same and in the end all parties finish with the same market share as when the price war erupted; but because they reduced prices, profit is lost, with no benefit for the firm
