Frequently Asked Questions - Theory of firm

FAQs - Theory of firm

You are expected to:

Define an oligopoly and characteristics of an oligopoly market structure

Distinction between a collusive and non-collusive oligopoly

Explanation of prices may not change due to interdependence among firms.

Support your explanation with the help of an kinked demand curve

Explain the diagram

Explain that there might be non-price competition in this kind of market structure such as advertising.

However, despite their relative stability, prices may change in a non-collusive oligopoly:

– price change operated by market leaders

– long-run changes leading to economies of scale and lower LRACs.

TAGS: Theory of firm

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