Oligopoly

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Oligopoly

• Chapter 7 Section 4

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Indiana Academic Standards for Economics

• Standard 3.4
• Identify the basic characteristics of the four
  market structures perfect competition, monopoly,
  oligopoly, and monopolistic competition.

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Markets
1
2
3
4
Perfect Competition
Monopolistic Competition
Name
Monopoly
Buyers Sellers
Many
One Seller
Many
Type of Good
Identical
Unique
Different
Enter Exit
Easy
Hard
Easy
Agriculture Stock Market
Utilities
Clothing Fast Food
Example
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Objectives

• What are the characteristics of oligopoly?
• What are some examples of oligopoly?
• Are oligopolies price takers or price searchers?
• What are cartel agreements?

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Question

• Can you write the name of 5 U.S. CAR
  MANUFACTURERS?
• General Motors
• Ford Motor Company
• Daimler Chrysler Corporation
• ?
• ALL ARE OLIGOPOLIES

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US Automakers

• GENERAL
• MOTORS
• Buick
• Cadillac
• Chevrolet
• GMC
• Holden
• Hummer
• Opel
• Pontiac
• Saab
• Saturn
• Vauxhall

• FORD
• Lincoln
• Mercury
• Jaguar
• Land Rover
• Volvo
• Mazda

• DAIMLER
• CHRYSLER
• Chrysler
• Dodge
• Jeep
• AM GENERAL
• PANOZ
• SALEEN
• STUDEBAKER
• VECTOR

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3 Characteristics of anOLIGOPOLY

• 1. FEW Sellers
• 2. IDENTICAL or Slightly Different Products
• 3. Significant BARRIERS to Entry to or Exit
  from the Market

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• Cartel Agreement
• Agreement specifying that the firms will act in
  a way to reduce competition among them
• Example
• OPEC

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• What is competition?
• Which of the 4 Market Structures has the most
  competition? (PC-MC-O-M)
• Perfect Competition
• (Keeping an equal playing field)

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Price Control None Much Not as Much Not as Much
Market Structure Perfect Competition Monopoly Mono
polistic Competition Oligopoly
of Sellers Many One Many Few
Barriers To Entry None Extremely High None Signi
ficantly High
Type of Product Identical Unique Slight Differnt
Identical or slight diff
Examples Corn, Wheat, Stock Market Utilities Clot
hing, Meals Cars, Cereal
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Assessment

• What are the characteristics of oligopoly?
• What are some examples of oligopoly?
• Are oligopolies price takers or price searchers?
• What are cartel agreements?

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U.S. Automakers

• AM General (not sold to private individuals
  similar vehicles are sold to ordinary consumers
  as Hummers)
• DaimlerChrysler (Though headquartered in
  Stuttgart, Germany, DaimlerChrysler is sometimes
  seen as an American car manufacturer.)
• Jeep
• Chrysler
• Dodge

• General Motors
• Buick
• Cadillac
• Chevrolet
• GMC
• Hummer
• Pontiac
• Saturn
• Ford
• Lincoln
• Mercury
• Panoz
• Saleen
• Studebaker Motor Company
• Vector Supercars