What is a natural oligopoly? How does it arise? Give an example

What will be an ideal response?


A natural oligopoly is an industry in which a small number of large firms can supply the entire market at a lower price than could a larger number of smaller firms. Natural oligopoly arises when economies of scale and limited market demand create natural barriers to entry. For example, suppose the minimum efficient scale for a taxi company is 30 rides per day and the ATC at this level of output is $10 per ride. If the quantity of taxi rides demanded at $10 is 60 rides per day, there is only room in the market for two taxi companies. With more taxi companies, either the price would have to fall below $10 per ride or the ATC would have to rise above $10 per ride. In both cases the firms would incur an economic loss and would exit until only two firms are left.

Economics

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Starting from long-run equilibrium, a decrease in autonomous investment results in ________ output in the short run and ________ output in the long run.

A. lower; potential B. higher; higher C. higher; potential D. lower; higher

Economics

What is the difference between labor-saving technology and labor-complementary technology?

What will be an ideal response?

Economics

Which of the following are policies that can affect cyclical unemployment?

a. adjust interest rates b. provide welfare assistance c. regulate hiring practices d. provide unemployment compensation

Economics

What is the GDP using the information shown? In billions of dollarsConsumption5,100Investment1,100Transfer payments1,050Government Purchases1,400Exports850Imports950Net foreign factor income20 

A. 9,400 B. 6,400 C. 7,500 D. 10,470

Economics