?which of The Following Markets Are Oligopolistic Discussion
ANSWER
Oligopoly refers to a market structure where a few large firms dominate the market. In an oligopolistic market, the actions of one firm can have a significant impact on the other firms in the market. Let’s analyze the provided options one by one to determine which ones are oligopolistic:
- Passenger Airlines: This is typically considered an oligopolistic market, as a handful of major airlines control a significant portion of the market share. For example, in the U.S., airlines like American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines dominate the industry.
- Cereal: The cereal market can vary depending on the specific brands and varieties, but generally, it can be considered oligopolistic as well. A few large companies such as Kellogg’s, General Mills, and Post Consumer Brands tend to control a substantial portion of the market.
- Fast Food: The fast food industry can also be classified as oligopolistic. A small number of well-known chains like McDonald’s, Burger King, Wendy’s, and KFC dominate the market.
- Wheat: The wheat market is more likely to be competitive rather than oligopolistic. Many farmers produce wheat, and it’s a globally traded commodity, which means that no single company or a small group of companies have a dominating influence on the entire market.
- Golf Equipment: The golf equipment market might have a mix of oligopolistic and competitive elements. While there are several brands like Callaway, TaylorMade, and Titleist that hold significant market share, there’s also room for smaller companies to operate.
- College Bookstore: This one can be a bit more complex. College bookstores often operate within a limited geographical scope and might have exclusivity agreements with certain publishers. This could lead to an oligopolistic-like situation, especially if there are only a few major textbook publishers dominating the market.
In oligopolistic markets, pricing and service can be influenced by the competitive dynamics among the few major players. The firms must consider their rivals’ reactions when making decisions about pricing and other strategic moves. This can lead to price wars, where firms undercut each other’s prices to gain market share, followed by periods of stability.
For example, consider the passenger airline industry. When one major airline lowers its prices, others might follow suit to remain competitive, ultimately leading to lower fares for consumers. However, this pricing competition might also impact the quality of services as airlines cut costs to maintain profitability.
Resource:
- Investopedia article on Oligopoly
Remember that real-world market conditions can be complex and may evolve over time, so these examples are meant to provide a general understanding of the concept.
Question Description
I’m studying for my Economics class and don’t understand how to answer this. Can you help me study?
Which of the following markets are oligopolistic?
- passenger airlines
- cereal
- fast food
- wheat
- golf equipment
- the college bookstore on your campus
What happens to pricing and service in oligopolistic environments? Please use an example and include a resource.
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