What is oligopoly? Differentiate between monopoly and oligopoly. How is price determined under oligopoly?
Understand the Problem
The question is asking for a definition of oligopoly and a comparison between oligopoly and monopoly, specifically how price is determined in an oligopoly market structure.
Answer
Oligopoly features few dominant firms; prices rely on competition and strategic behavior. Monopoly has one firm controlling the market.
Oligopoly is a market structure with a few large firms dominating the market. In a monopoly, one firm controls the market entirely. Under oligopoly, prices are determined through competition, strategic interaction, and sometimes collusion among firms, leading to interdependent pricing decisions.
Answer for screen readers
Oligopoly is a market structure with a few large firms dominating the market. In a monopoly, one firm controls the market entirely. Under oligopoly, prices are determined through competition, strategic interaction, and sometimes collusion among firms, leading to interdependent pricing decisions.
More Information
In oligopoly, firms are interdependent, meaning each firm's actions affect the others, unlike in monopolies where the single firm sets prices.
Tips
A common mistake is assuming all firms in an oligopoly behave the same; however, they may engage in different strategies based on market conditions.
Sources
- Difference Between Monopoly And Oligopoly | Impact & Implication - testbook.com
- The Difference Between Monopoly vs. Oligopoly - Investopedia - investopedia.com
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