Question

Oligopoly
4.1 Markets differ according to what three dimensions in terms
of market structure?
4.2 What is a real-life example of an oligopoly and why?
4.3 What are the three models of oligopoly?
4.4 Would a firm prefer to be in a market with an oligopoly, a
monopoly, or perfect competition? Why?
4.5 Would a consumer prefer to be in a market with an oligopoly,
a monopoly, or perfect competition? Why?

Answer 1

4.1)

Following are three dimensions:

• Numbers of buyers and sellers in market.
• Nature of product or it is homogenous and hetrogenous.
• Entry and exit barriers.

4.2)

Oligopoly market exists where only few firms are there in market. Each firm keeps the larger share of market. Cable TV, and Airlines are examples of oligopoly market.

4.3)

Following are three models of oligopoly Market:

• Cournot Model.
• Bertrand Model
• Dominant firm model.
• Stackelberg Model.

4.4)

Firm would like to operate in monopoly market, it restricts output and raises price level. Thus, profit will rise for firm.

4.5)

Consumer would like to see perfectly competitive market. Output level is maximized in perfectly competitive market.