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Which of the following is a primary reason for firms to engage in vertical integ...
Nov 2, 2023
Which of the following is a primary reason for firms to engage in vertical integration?
A) To ensure constant production
B) To increase market share
C) To control different stages of the production process
D) To diversify their product range
C
Key Concept
Vertical integration
Explanation
Vertical integration refers to a strategy where a firm engages in different stages of the production process, from acquiring raw materials to distributing the final product. This allows the firm to have control over the entire production process and can lead to cost savings, improved coordination, and increased efficiency.Whatarethepotentialbenefitsofverticalintegrationforfirmsintermsofcontrollingdifferentstagesoftheproductionprocess?,Generatemeasimilarquestion Generate me a similar question
What is the primary purpose of oligopoly in a market structure?
(A) To ensure constant production
(B) To increase market share
(C) To control different stages of the production process
(D) To diversify their product rangeAnswer:A,Answer:B,Answer:C,Answer:D
Answer: C
C
Key Concept
Control different stages of the production process
Explanation
In an oligopoly market structure, a few large firms dominate the market. The primary purpose of oligopoly is to control different stages of the production process. This allows the firms to have a significant influence on the market and maintain their market power. By controlling various stages of production, such as raw material acquisition, manufacturing, and distribution, oligopolistic firms can strategically position themselves to have a competitive advantage and exercise control over the market.Whatfactorscontributetotheformationofanoligopolyinamarketstructure?,GeneratemeasimilarquestionWhat factors contribute to the formation of an oligopoly in a market structure?
answer: The factors that contribute to the formation of an oligopoly in a market structure include barriers to entry, economies of scale, and strategic behavior among firms.
Key Concept
Factors contributing to the formation of an oligopoly
Explanation
Oligopoly is a market structure characterized by a small number of firms dominating the market. The following factors contribute to the formation of an oligopoly:
1. Barriers to entry: Oligopolies often have high barriers to entry, which make it difficult for new firms to enter the market. These barriers can include high startup costs, economies of scale, and legal restrictions. As a result, existing firms have a significant advantage over potential new entrants.
2. Economies of scale: Oligopolistic industries often have economies of scale, which means that larger firms can produce goods or services at a lower average cost. This gives larger firms a competitive advantage and makes it difficult for smaller firms to compete effectively.
3. Strategic behavior: Oligopolistic firms engage in strategic behavior to maximize their profits. They closely monitor and react to the actions of their competitors, such as pricing decisions, advertising campaigns, and product innovations. This strategic behavior can lead to collusion or non-price competition, such as advertising wars or product differentiation.
Overall, these factors contribute to the formation of an oligopoly by creating barriers to entry, allowing economies of scale, and encouraging strategic behavior among firms.Whatarethebarrierstoentrythatcancontributetotheformationofanoligopolyinamarketstructure?,GeneratemeasimilarquestionWhat are the barriers to entry that can contribute to the formation of an oligopoly in a market structure?
answer: Barriers to entry that can contribute to the formation of an oligopoly in a market structure include:
a) Economies of scale: Large-scale production allows firms to achieve lower average costs, making it difficult for new entrants to compete on price.
b) High capital requirements: Industries with high capital requirements, such as telecommunications or automobile manufacturing, can deter new firms from entering the market due to the significant investment needed.
c) Product differentiation: Established firms in an oligopoly often have well-known brands and loyal customer bases. This makes it challenging for new entrants to attract customers and compete effectively.
d) Government regulations: Government regulations, such as licensing requirements or patents, can create barriers to entry by limiting the number of firms allowed in a particular industry.
Key Concept
Barriers to entry refer to obstacles that make it difficult for new firms to enter a market and compete with existing firms. In an oligopoly, where a small number of firms dominate the market, these barriers can contribute to the formation and maintenance of the oligopoly structure.
Explanation
The presence of barriers to entry in a market can limit competition and allow existing firms to maintain their market power. Economies of scale, high capital requirements, product differentiation, and government regulations are common barriers that can contribute to the formation of an oligopoly.Whataresomeexamplesofbarrierstoentryinanoligopolisticmarketstructure?,Generatemeasimilarquestion© 2023 AskSia.AI all rights reserved