Economics - Oligopoly - Exam Questions

2. (a) Some Telecoms’ analysts believe the main mobile operators in Ireland – Vodafone, O2, Meteor and 3 – control an oligopoly and have little reason to make the market really competitive. (The Irish Times, November, 2010)

(i) Outline three key features of an oligopolistic market.

Firms in an oligopolistic market may have objectives other than profit maximisation.

(ii) Outline two objectives firms in oligopoly may have, other than achieving the maximum level of profits. (25)

(b) Using one clearly labelled diagram:

(i) Explain the shape of the ‘kinked’ demand curve facing a firm in oligopoly.

(ii) Explain the long run equilibrium position of this firm. (25)

(c) It is suggested that consumers prefer price competition in the market place, yet there are benefits for consumers arising from non-price competition.

(i) Explain two reasons why consumers may prefer price competition.

(ii) Describe two benefits to consumers of non-price competition. (25)

[75 marks]

2. (a) State and explain THREE key features of an oligopolistic market. (15 marks)

(b) With the aid of ONE clearly labelled diagram:

(i) Explain the shape of the ‘kinked demand curve’ under oligopoly.

(ii) Explain the long run equilibrium position of a firm facing a ‘kinked demand curve’.

(iii) Explain what is meant by the term ‘rigidity of prices’ under a ‘kinked demand curve’. (35 marks)

(c)

(i) Explain THREE types of collusion which may occur in an oligopolistic market.

(ii) Do you believe that the Irish retail market for banking services (e.g. personal current accounts.) operates under oligopolistic conditions? Explain your answer. (25 marks)

[75 marks]

1. (a) Outline THREE key features of an oligopolistic market and state ONE example of an oligopolistic market in Ireland. (20 marks)

(b) With the aid of ONE clearly labelled diagram:

(i) Explain the shape of the demand curve facing a firm in oligopoly.

(ii) Explain the relationship between this demand curve and the firm’s marginal revenue curve.

(iii) Explain the long run equilibrium position of this firm. (40 marks)

(c) Explain THREE methods by which firms in oligopolistic markets may collude. (15 marks)

[75marks]

The same type of questions come up every time. If you know the notes you can answer any exam question.