Ch. 14 Pt. 2 – Oligopoly: Firms in Less Competitive Markets – Flashcards
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What is an oligopoly?
Three examples of oligopolies in the U.S. are industries that produce or sell
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a market structure where a small number of interdependent firms compete.
computers, athletic footware, and cigarettes.
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Without barriers to entry,
The most important barriers to entry are
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new firms will enter industries where firms are earning economic profits.
economies of scale, ownership of a key input, and government imposed barriers.
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An example of a government imposed barrier to entry is
The government would be willing to impose barriers to
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a quota on imports and occupational licensing.
all of the above.
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Which one of the following is not correct?
The government issues patents to firms
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Other firms can produce or sell their version of the patented product.
to encourage innovation and to give the firms time to develop a new product.
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Amazon was spending $2 billion per year to build additional distribution warehouses and data centers. "Such investments create a significant barrier to new entrants." Why?
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Competitors would need to expend significant capital to compete.
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If an entrepreneur is planning on producing 5,000 units, should he choose the smaller or larger operation?
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Either the smaller or larger operation.
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Low barriers to entry meant that
Frequent technological innovations meant that
A high rate of firm bankruptcy meant that
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the number of firms in the industry changes.
costs would be falling.
exit from the industry was common.
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It is more likely for an industry to be an oligopoly than competitive in the presence of economies of scale because
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minimum average cost occurs when firm output is a large fraction of industry output.
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The Aluminum Company of America (Alcoa)
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has had almost exclusive ownership of bauxite, which is a key input.
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What level of concentration indicates that an industry is an oligopoly?
The four-firm concentration ratio
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Most economists believe that a four-firm concentration ratio of greater than 40 percent indicates that an industry is an oligopoly.
is flawed in that does not include sales in the U.S. by foreign firms.
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An oligopoly firm is similar to a monopolistically competitive firm in that
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both firms have market power.
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An oligopolist differs from a perfect competitor in that
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there are no entry barriers in perfect competition but there are entry barriers in oligopoly.
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A characteristic found only in oligopolies is
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interdependence of firms.
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Producing a homogeneous product occurs in which of the following industries?
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oligopoly and perfect competition.
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Producing a differentiated product occurs in which of the following industries?
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monopolistic competition and oligopoly.
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If an industry is made up of five identical firms, the four-firm concentration ratio is
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80%
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The Discount Department Stores industry is highly concentrated. What does this mean?
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A few large stores account for a significant portion of industry sales.
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An oligopolist's demand curve is
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unknown because a response of firms to price changes by rivals in uncertain.
