Answer to Question #125872 in Microeconomics for ayurna

Question

Identify the type of market/industry structure that is applicable to the cinema industry in South Africa. Justify your answer by referring to the main characteristics of this market structure. (

Answer 1

Cinema industry is part of the entertainment industry. Therefore the cinema industry falls under oligopoly market structure. An oligopoly market structure refers to a market with few sellers of a specific commodity. In this case of film industry the sellers can influence the price of the output.

Characteristic of oligopoly market include;

There are few sellers. Oligopolistic market comprises of few firms selling particular products and services.

There are barrier to entry. It is difficult for small startups to enter the market and compete with relatively large firms which have economies of scale.

Interdependence. Oligopoly companies are relatively large in the market they operate. Therefore when one of the companies changes price it impacts the other company.

Competition. Since there are few firm in oligopolistic market each firm is alert to keep its competitive advantage against rival companies.