ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Four major cereal companies secretly agree to charge higher prices for all boxes of cereal sold in the USA
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Three airline companies start a price war by cutting prices on all domestic flights by fifteen percent
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Two local stores start selling similar cookie designs during the holiday season
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One popular car manufacturer released a new feature on its SUV and its rival announced this feature would also be available on its SUV
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Detailed explanation-1: -A group of firms that have a formal agreement to collude to produce the monopoly output and sell at the monopoly price is called a cartel.
Detailed explanation-2: -An oligopoly is when a few companies exert significant control over a given market. Together, these companies may control prices by colluding with each other, ultimately providing uncompetitive prices in the market.
Detailed explanation-3: -Cartel: A formal agreement among firms in an industry to set the price of a product and the outputs of the individual firms or to divide the market for the product geographically. To maximize profits, the firms collude and agree to a certain price.
Detailed explanation-4: -What are the characteristics of oligopoly in economics? Oligopoly characteristics include high barriers to new entry, price-setting ability, the interdependence of firms, maximized revenues, product differentiation, and non-price competition.