Oligopoly

Question 1

What is the nature of an oligopoly?

Answer 1

• Few sellers
• Homogeneous or differentiated
• Market is restricted
• Actions affect other sellers

Question 2

What is unique about the demand curve?

Answer 2

It has a kink at the market market price. At the market price, it is more elastic. Below the kink it is less elastic.

Question 3

How does a kink affect MR?

Answer 3

it causes it to go horizontal

Question 4

Where is price set?

Answer 4

MR = CR extend the link to the demand curve, that equals the price.

Question 5

In an oligopoly, price > MC which results in????

Answer 5

A misallocation of resources (excess profits)