Answer to Question #279764 in Microeconomics for Sbuh

Question

Explain any five characteristics of an oligopoly

Answer 1

1. Few sellers: The Oligopoly has a few numbers of sellers.
2. The situation of monopoly power can arise in the oligopoly market. Each firm that has power controls the market by adjusting the price and the output.
3. Cartels can be formed under the oligopoly market when firms decide to either cooperate or cheat.
4. The firms in the oligopoly market are interdependent. One firm acts according to the changes made by the other firm. If the firm increases its prices, the other firms will not follow while if it decreases, the other firms follow the changes.
5. The oligopoly market has differentiated as well as homogenous products.
6. The demand curve of the firms in the oligopoly market is the kinked shape. It is highly elastic from the top and less elastic from the bottom with a kink.
7. There occurs price rigidity in the case of an oligopoly market as well.