Question

B. What are the typical Efficiency Outcomes of an Oligopolistic industry? (5 marks)

Answer 1

Answer: Oligopolistic Industry is an example of such market structure where very few sellers exists in the market for the products, which a consumer buy.They can produce similar as well as different products as well.

General Oligopolistic structure is seen as against free market mechanism and consumers face high prices due to limited available options with them.

Few efficiency outcomes that can be associated with Oligopolistic market structure are:

1.Stable prices :As the firms generally concentrate on non price competition hence variations in the price is not at par with that in free market economy.

2 Interdependence among the firms ,which led to ensured output level and can sustain long in the market.Which reduces the risk of insolvency and bankruptcy insurances in the market structure.

3.Firms more often collude in an order to stabilize unstable markets, hence  to reduce the risks involved in these markets for investment and product development.

4.Many at times Oligopoly shows more competition than free market,with relatively low prices and high production. This may lead to an efficient outcome approaching perfect competition.Often it can be seen in OPEC when countries among cartel themselves decide to increase production and reduce costs.