WorksheetsChapter 21 - Oligopoly IGCSE Economics
Total questions: 18
Worksheet time: 2hrs 35mins
An oligopoly is a market structure that is characterized by a (a) number of (b) firms who are (c) and produce (d) products.
How many firms are there in an oligopoly?
Many
Few
One
Eight
The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market. This is called:
Interdependence
Independence
Smaller rivals in the market often survive because...
They do not compete directly with dominant firms (niche market)
They are small
No one knows them
Analyze Graphs Are the music companies in this graph an example of an oligopoly? Briefly explain why or why not? Use the features of an oligopoly to answers.
Non-price competition is the use of ads, giveaways, promotions and product differentiation to win customers. It is a way to avoid price wars. Make consumers prefer your product, build brand loyalty for your product versus the other products.
True
False
Firms in an oligopoly do not prefer to compete using non-price competition.
True
False
Interpret Why is a price war harmful to producers?
If prices go too high, then the producers will have too many competitors.
If prices go too low, then the producers won’t be able to make a profit.
If there is a price war, then there can no longer be a price leader.
If prices go too high, then the producers will have too few competitors.
Define collusion (blue box definition) Informal (a) .
Why are collusions made?
To increase choice
The oligopoly can act like a monopoly and stop competing against each other.
None of the above
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
duopoly
cartel
dominant producer
price war
price leadership
What do firms in a cartel do?
Join together and agree on price or output upon colluding
They compete against each other
Both
Why is there are market leader in many industries in an oligopoly?
The other firms don't know what to do.
I have no idea.
Because collusion is illegal in the USA and Europe. It's a way to do it legally (follow the leader).
5. Which of the following best describes the relationship between the market leader and other firms in an oligopoly?
A. When one firm acts, the others tend to follow.
B. When one firm acts, the others do not follow.
C. When one firm acts, the other firms will not produce a different product.
D. When one firm enters, the other firms will exit the industry.
It is very easy to enter an oligopolistic market. True or False?
True
False
Name the five barriers to entry.
When firms attain economies of scale, their average costs will____. This is a benefit of being a large firm.
Not change
Increase
Decrease
All of the above
Choice is an advantage for oligopolistic markets
True
False
