Chapter 16 Lecture Outline - Economics 101H Vandan Desai...

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Economics 101H Vandan Desai P a g e | 1 Chapter 16: Oligopoly (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- I. Between Monopoly and Perfect Competition A. Imperfect competition —market structures that fall between perfect competition and pure monopoly i. Includes industries in which firms have competitors but do not face so much competition that they are price takers ii. Types of Imperfectly Competitive Market Oligopoly —only a few sellers, each offering a similar or identical product to the others (Ex: tennis balls, crude oil, etc.) Monopolistic Competition many firms selling products that are similar but not identical (Ex: novels, movies, CDs, video games, etc.) B. to decide what structure best describes a market II. Markets With Only A Few Sellers A. Because of the few sellers, the key feature of oligopoly is the tension between cooperation and self-interest B. Characteristics of an Oligopoly Market i. Few sellers offering similar or identical products ii. Interdependent firms iii. Best off cooperating and acting like a monopolist by producing a small quantity of output and charging a price above marginal cost C. Duopoly —oligopoly with only two members; simplest type of oligopoly i. Price and Quantity Supplied The price of water in a perfectly competitive market would be driven to where the marginal cost is zero : a. P = MC = $0 b. Q = 120 gallons c. Profit = $0 The price and quantity in a
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Chapter 16 Lecture Outline - Economics 101H Vandan Desai...

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