What are the characteristics of an Oligopoly? 1. Number of Sellers? 2. Pricing?
ID: 1125503 • Letter: W
Question
What are the characteristics of an Oligopoly? 1. Number of Sellers? 2. Pricing? What is the four-firm concentration ratio for this industry of 6 firms with annual sales of $70 billion, $40 billion, S30 billion, S30 billion, S20 billion, and S10 billion? What does this four-firm concentration ratio tell you about the industry? Prisoner's Dilemma You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation: If both of you work hard, you both get an A, which gives each of you 40 units of happines . If only one of you works hard, you both get a B, which gives each of you 30 units of happiness. . If neither of you works hard, you both get a D, which gives each of you 10 units of happin Working hard costs 25 units of happiness. Your payoff matrix looks like this Your Decision Work Classmate's Decision Work 15, 15 Shirk30.5 Shirk 5,30 10, 10 What is the most likely decision? What is the most likely decision called?Explanation / Answer
1. Oligopoly is a market structure characterized by the presence of a few large firms who produces homogeneous or differentiated products intensely competing against each other and recognizing interdependence in their decision-making. Under this type of market, prices are normally rigid as firms are afraid of immediate reactions of the rival firms which may start price war. The demand curve facing an oligopoly firm is indeterminate because of high degree of interdependence and uncertainty among oligopolistic firms. The firm does not know how his rival firms react to its decisions. Sales and profits of the firms are affected by the rivals' firm's actions. Example: there are only a few auto-producers in the Indian market. Maruti, Tata, Ford, Fiat are some well-known brand names.
a) Few firms of large size
b) Price war
2. Four firm concentration ratio = (70 billion + 40 billion + 30 billion + 30 billion) / (70 billion + 40 billion + 30 billion + 30 billion + 20 billion + 10 billion)
= 170 billion / 200 billion = 17/20 = 0.85
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.