Studied by 3 peopleOligopoly
________: market with few dominant sellers which together controls all or most of a markets share.
Profit
________ is equal to average total cost.
Oligopoly
market with few dominant sellers which together controls all or most of a markets share
Interdependence of firms
action of one firm affects the action of the other firms
Barriers to entry
market maintains its small number
Formal Collusion
exists when firms form an organisation or a group which prices the amount of output to be produced is decided
Tacit Collusion
type of collusion that exists when firms charge the same price on goods they produce without having a formal agreement
Monopoly
the exclusive possession or control of the supply of or trade in a commodity or service.
Formal Collusion
exists when firms form an organisation or a group which prices the amount of output to be produced is decided
Tacit Collusion
type of collusion that exists when firms charge the same price on goods they produce without having a formal agreement
Market efficiency in Oligopoly
Produces where marginal revenue is equal to marginal cost MR=MC
Non-collusive oligopoly
exists when firms in the market do not organise themselves to decide on the price and the quantity of outputs to be produced
Diseconomies of scale
It is possible that if a monopoly gets too big, it may experience diseconomies of scale. – higher average costs because it gets too big
Research and development
The supernormal profit can enable more investment in research and development, leading to better products.
Allocative inefficiency
A monopoly is allocatively inefficient because in monopoly the price is greater than MC. P > MC. In a competitive market, the price would be lower and more consumers would benefit
Good quality firm
A firm may gain monopoly power because it is very innovative and successful
Interdependence of firms
action of one firm affects the action of the other firms
Note
Flashcard