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Author Question: Describe the characteristics of an oligopoly. What will be an ideal ... (Read 95 times)

TVarnum

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on: Jun 29, 2018
Describe the characteristics of an oligopoly.
 
  What will be an ideal response?

Question 2

What is likely to happen in a used-car market if the buyers feel that the best they can do is to buy a lemon?
 
  A) The sellers of gems reap high profits.
  B) Higher gains from trade are realized.
  C) The entire market shuts down.
  D) The sellers of lemons earn high profits.


Edwyer

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Reply #1 on: Jun 29, 2018
Answer to Question 1

There are a small number of firms that act interdependently. They are tempted to form a cartel and collude to increase profits. They can compete on price only (if they produce identical products) or compete on price, product quality and marketing (if they produce slightly different products). Natural or legal barriers prevent the entry of new firms.

Answer to Question 2

C


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