Author Question: List three reasons why oligopolies are considered to be inefficient. What will be an ideal ... (Read 93 times)

jparksx · **on:** Jun 29, 2018

List three reasons why oligopolies are considered to be inefficient.

What will be an ideal response?

Question 2

Suppose that when the price of hamburgers increases, the Ruiz family increases their purchases of hot dogs. To the Ruiz family

A) hamburgers and hot dogs are normal goods. B) hamburgers and hot dogs are substitutes.
C) hamburgers and hot dogs are inferior goods. D) hamburgers and hot dogs are complements.

stillxalice · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

(1.) Oligopolies produce where price is greater than marginal cost. This is an output level that is lower than the socially optimal level of output.
(2.) Entry barriers in oligopolistic markets prevent new capital and other resources from responding to profit signals.
(3.) Product differentiation accomplished through advertising may lead to waste and inefficiency if it serves as an additional barrier to entry.

Answer to Question 2

B