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Chapter 17 Oligopoly

Chapter 17 Oligopoly - Chapter17:Oligopoly I Oligopoly A...

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Chapter 17: Oligopoly Page 1 of 9 I. Oligopoly A. Oligopoly is a common market structure. It arises from the same forces that lead to monopoly, except in weaker form. It is an industry with only a small number of producers. B. Understanding Oligopoly Duopoly: an Oligopoly with only 2 firms 1. Begin by assuming no Fixed costs and the MC = $0.
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Page 2 of 9 Price of Lysine (in lbs.) Quaintly Demanded Total Revenue $12 0 $ 11 10 10 20 200 9 30 270 8 40 320 7 50 350 6 60 5 70 4 80 320 3 90 270 2 100 200 1 110 110 0 120 0 Monopoly – Collusion (Cooperative) Q Monopoly = _______, P M = ________ ܳ ஽୳୭୮୪୷ = _______, P = ________ & ܳ = _______, P = ________ Collusion : an agreement among companies about quantities or prices
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Page 3 of 9 2. Companies would love to cooperate and form cartels Cartel : A group of firms acting in unison But often impossible: 1. Illegal 2. Incentive to Cheat – Noncooperative Behavior : when companies ignore the effects of their actions on d each other’s profits Assume Ajimoto honored the agreement and produced (30lbs.) Q Ajimoto Q ADM Price Profit = Revenue of ADM 30 20 $ 30 30 30 40 30 50
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