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Characteristics of Oligopoly quiz

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  • What is an oligopoly market structure characterized by in terms of the number of firms?
    An oligopoly is characterized by a few firms dominating the market.
  • Can goods in an oligopoly be identical or differentiated?
    Yes, goods in an oligopoly can be either identical or differentiated.
  • What is an example of an identical good in an oligopoly?
    Aluminum is an example of an identical good produced in an oligopoly.
  • What is an example of a differentiated good in an oligopoly?
    Coke and Pepsi are examples of differentiated goods in an oligopoly.
  • What does it mean for firms in an oligopoly to be interdependent?
    Interdependence means firms must consider competitors' actions when making pricing decisions.
  • How does market power in an oligopoly compare to a monopoly and perfect competition?
    Oligopoly firms have significant market power, less than a monopoly but more than in perfect competition.
  • What are barriers to entry in an oligopoly?
    Barriers to entry are obstacles that prevent new firms from entering the market.
  • How does ownership of key resources act as a barrier to entry?
    If existing firms own essential resources, new firms cannot access them and are blocked from entering.
  • How can government regulation create barriers to entry in an oligopoly?
    Government regulation, such as patents, can legally prevent other firms from producing certain goods.
  • What are economies of scale and how do they relate to oligopolies?
    Economies of scale occur when increasing production lowers average total costs, favoring fewer large firms.
  • What is a natural duopoly and why does it occur?
    A natural duopoly occurs when economies of scale make it efficient for only two firms to supply market demand.
  • Why is it inefficient for many small firms to produce in a market with strong economies of scale?
    Many small firms would have higher costs and not reach minimum efficient scale, making production less efficient.
  • What is minimum efficient scale in the context of economies of scale?
    Minimum efficient scale is the lowest point where a firm fully benefits from economies of scale.
  • How do pricing decisions in oligopoly differ from those in perfect competition?
    Oligopoly firms are price makers to an extent, unlike perfect competition where firms are price takers.
  • Why do oligopoly firms need to make strategic decisions?
    Because their actions affect and are affected by competitors, requiring careful strategy in pricing and output.