Principles of Economics- Mankiw (5th) 341

Principles of Economics- Mankiw (5th) 341 - QUICK QUIZ:...

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CHAPTER 16 OLIGOPOLY 351 Reality, of course, is never as clear-cut as theory. In some cases, you may find it hard to decide what structure best describes a market. There is, for instance, no magic number that separates “few” from “many” when counting the number of firms. (Do the approximately dozen companies that now sell cars in the United States make this market an oligopoly or more competitive? The answer is open to debate.) Similarly, there is no sure way to determine when products are differenti- ated and when they are identical. (Are different brands of milk really the same? Again, the answer is debatable.) When analyzing actual markets, economists have to keep in mind the lessons learned from studying all types of market structure and then apply each lesson as it seems appropriate. Now that we understand how economists define the various types of market structure, we can continue our analysis of them. In the next chapter we analyze monopolistic competition. In this chapter we examine oligopoly.
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Unformatted text preview: QUICK QUIZ: Define oligopoly and monopolistic competition and give an example of each. MARKETS WITH ONLY A FEW SELLERS Because an oligopolistic market has only a small group of sellers, a key feature of oligopoly is the tension between cooperation and self-interest. The group of oligopolists is best off cooperating and acting like a monopolistproducing a Tap water Cable TV Monopoly (Chapter 15) Novels Movies Wheat Milk Monopolistic Competition (Chapter 17) Tennis balls Crude oil Oligopoly (Chapter 16) Number of Firms? Perfect Competition (Chapter 14) Type of Products? Identical products Differentiated products One firm Few firms Many firms Figure 16-1 T HE F OUR T YPES OF M ARKET S TRUCTURE . Economists who study industrial organization divide markets into four types monopoly, oligopoly, monopolistic competition, and perfect competition....
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