econchap16

econchap16 - BETWEEN MONOPOLY AND PERFECT COMPETITION...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Oligopoly Chapter 16 BETWEEN MONOPOLY AND PERFECT COMPETITION s Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. s Imperfect competition includes industries in which firms have competitors but do not face so much competition that they are price takers. BETWEEN MONOPOLY AND PERFECT COMPETITION s Types of Imperfectly Competitive Markets b Oligopoly s Only a few sellers, each offering a similar or identical product to the others. b Monopolistic Competition s Many firms selling products that are similar but not identical. Figure 1 The Four Types of Market Structure • Tap water • Cable TV Monopoly (Chapter 15) • Novels • Movies Monopolistic Competition (Chapter 17) • Tennis balls • Crude oil Oligopoly (Chapter 16) Number of Firms? Perfect • Wheat • Milk Competition (Chapter 14) Type of Products? Identical products Differentiated products One firm Few firms Many firms MARKETS WITH ONLY A FEW SELLERS s Because of the few sellers, the key feature of oligopoly is the tension between cooperation and self-interest. s Characteristics of an Oligopoly Market b Few sellers offering similar or identical products b Interdependent firms b Best off cooperating and acting like a monopolist by producing a small quantity of output and charging a price above marginal cost A Duopoly Example s A duopoly is an oligopoly with only two members. It is the simplest type of oligopoly.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Table 1 The Demand Schedule for Water A Duopoly Example s Price and Quantity Supplied b The price of water in a perfectly competitive market would be driven to where the marginal cost is zero: s P = MC = $0 s Q = 120 gallons b The price and quantity in a monopoly market would be where total profit is maximized: s P = $60 s Q = 60 gallons A Duopoly Example s Price and Quantity Supplied b The socially efficient quantity of water is 120 gallons, but a monopolist would produce only 60 gallons of water. b
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 6

econchap16 - BETWEEN MONOPOLY AND PERFECT COMPETITION...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online