"Oligopoly is the only market structure in which rivalry among firms takes place." Do you agree or disagree? Why?
What will be an ideal response?
Agree. Oligopolists recognize their strategic dependence and must take into consideration likely reactions by rivals to any decision they make. The firms realize they are in competition with other firms and may actively compete with them. Under perfect competition and monopolistic competition, there is no rivalry because the firms are too small to have any impact on the other firms. Each firm acts independent of the other firms. By definition there is no rival under monopoly. So, oligopoly is the only market structure where competitive behavior actually takes place.
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Use the concept of present value to explain the inverse relationship between the interest rate and the amount of investment a firm undertakes
What will be an ideal response?
A firm that has the ability to control to some degree the price of the product it sells
A) is also able to dictate the quantity purchased. B) faces a perfectly inelastic demand curve. C) is a price maker. D) faces a demand curve that is inelastic throughout the entire range of market demand.
If real GDP declines for at least one-half year, the economy is experiencing a:
a. depression. b. decline. c. recession. d. growth recession. e. deflation.
Bob works for a firm that produces umbrellas. He receives payment for his labor. The firm wants to expand but lacks the capital needed for the expansion. Bob, a person of some means, provides the capital. What payment(s) does the firm now make to Bob?
a. rental payment for the loan of capital and wages for labor b. wages for labor and profit for entrepreneurship in providing capital c. interest for Bob's entrepreneurship in providing capital d. profit for Bob's entrepreneurship in providing capital e. wages for labor and interest payments for providing capital