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Can you explain oligopoly to me?

Feb 20, 2024

Can you explain oligopoly to me?

Answer

An oligopoly is a market structure characterized by a small number of firms that have significant market power, which allows them to collaborate and influence prices and output.

Solution

a

Definition: An oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence

b

Market Power: Firms in an oligopoly have market power, meaning they can influence the price of their product by exercising control over their output or market share

c

Interdependence: Firms in an oligopoly are interdependent; the actions of one firm can have a significant impact on the others, leading to strategic decision-making

d

Barriers to Entry: Oligopolies often have high barriers to entry, which prevent new competitors from entering the market easily

e

Examples of Oligopolistic Behavior: This includes price fixing, collusion, and non-price competition such as advertising and product differentiation

Key Concept

Market Structure

Explanation

An oligopoly is a type of market structure where a few firms dominate the market and have the ability to set prices and output levels.