Assignment Nos.
10
Oligopoly
Charlotte MIchaella Cballero 1BSAIS-NONABM1
Please answer the following questions and submit on the deadline date.
1. What do you think is/are the importance of understanding the oligopolistic
competition in the market. How does economists/managers benefits in
understanding this market typology.
I think the importance of understanding oligopolistic competition is it is
important to always remember that in real oligopoly, the game is consistent. This
means that a company's actions in one game can affect the outcome of future
games. In this situation, we can see that the best result that yields the largest
gross profit is achieved when the two companies collide. This will be the best
long-run equilibrium situation that will bring the greatest benefit to all businesses.
So, this a important knowledge to all the owners or to those businesses who are
in the oligopolistic competition.
The biggest reason an oligopoly exists is cooperation. Businesses benefit
more economically from collaborating on a specific price than competing with
competitors. Economists/managers should know how to set a price for their
product. By controlling prices, oligopoly’s can raise barriers to entry and protect
themselves from potential new entrants. This is very important because the new
firm can offer a much lower price and thus jeopardize the life of the collusion
firm's profits.
2. Are the following company an example of an oligopolistic competition . If
your answer is yes or no. Support your claim with facts and data. (Shell,
Microsoft, Google, Meralco, Honda Car).
Yes. Shell is an example of a gasoline company and has an oligopoly in
the market. An oligopoly is a market system dominated by several companies
whose behavior is interdependent. For Google, it is also compete directly with its
other competitors. So, given its large market share and excessive profits, Google
is an oligopoly. Also, automobile engines are an oligopolistic industry. Meralco
Electricity is a prime example of a Philippine monopoly, so it is not a oligopoly.
Some examples of oligopoly are the gas and telecommunications industry, the
automotive sector, and the banking system.
3. How do oligopolistic company determines its price and earn profit in the
market. Explain and support your answers.
When oligopolies determine how much output and price to appoint to a
given market, they are tempted to act as if they were monopolies. Together,
oligopolies can limit their industrial production, charge higher prices and share
profits. When some companies work together they tend to reduce output and
keep prices high, it is called collusion.
REFERENCES:
Corporate Finance Institute. (2021, February 9). Oligopoly.
https://corporatefinanceinstitute.com/resources/knowledge/economics/oligopoly/
Greenlaw, S. A. (2017, Jan 12). Oligopoly – Principles of Economics 2e.
Pressbooks.
https://opentextbc.ca/principlesofeconomics2eopenstax/chapter/oligopoly/
