in an industry with a large number of firms a-each firm will produce a large quantity,relative to market demand, b-one firm will d

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in an industry with a large number of firms a-each firm will produce a large quantity,relative to market demand, b-one firm will dominate the market, c-collusion is impossible, d- competition is eliminated​

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Eliza 4 months 2021-07-18T22:19:35+00:00 1 Answers 0 views 0

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    2021-07-18T22:21:14+00:00

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    Explanation:An oligopoly (from Greek ὀλίγος, oligos “few” and πωλεῖν, polein “to sell”) is a market form wherein a market or industry is dominated by a small group of large sellers (oligopolists). For example, it has been found out that electrical and tobacco industry are highly oligopolist in the US.[1]

    Oligopolies can result from various forms of collusion that reduce market competition which then leads to higher prices for consumers and lower wages for the employees of oligopolies. Under this situation, oligopolists act like a monopoly and ultimately gain a market power. While they still can choose to compete hard instead of colluding together and ending up with a scenario where is similar to perfect competition.[2] Oligopolists have their own market structure.[3]

    With few sellers, each oligopolist is likely to be aware of the actions of the others. According to game theory, the decisions of one firm therefore influence and are influenced by decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants. Entry barriers include high investment requirements, strong consumer loyalty for existing brands and economies of scale and these barriers effectively facilitate the formation and sustainability of collusion.

    The fundamental reason is related to future retaliation (deviation). In other words, firms will lose less for deviation and thus have more incentive to undercut collusion price (obtain short-term deviated profit) when future entry continues.[4] There are other factors that could also facilitate collusion such as market transparency and frequent interaction.[4] In developed economies oligopolies dominate the economy as the perfectly competitive model is of negligible importance for consumers. Specifically, oligopolists will implement practise called price fixing to dominate the economy. Taking an example from US in 2013 that most new prosecuted oligopolist cases were based on price fixing.[5] However, this will bring negative impacts since it ends up with less choices and high prices for customers.[6] Another difference between oligopoly and perfect competition is that oligopolists do not have a supply curve. Instead, they search for the best price-output combination.[7]

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