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8/7/2019 Chapter 10 Monopolistic Competition, Oligopoly & Barriers to Entry
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MANAGERIAL
ECONOMICS
8/7/2019 Chapter 10 Monopolistic Competition, Oligopoly & Barriers to Entry
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MONOPOLISTICCOMPETITION,
OLIGOPOLY &BARRIERS TO ENTRY
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PRESENTED BY -
Ali Zain Raza
Mavra Pervaiz
Faisal Arshad
Sehrish Qadir
Irum Rabeel
Aasfar Javed
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WHAT ARE MARKETS?
A market is where buyers and sellers:
meet to exchange goods and services
usually in exchange for money
The market may be in one specific place
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ESSENTIALS OF MARKET
Commodity fortransaction
Networkof buyers & sellers
Competition between buyers & sellers
Aplace orasituation fortransaction
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TYPES OF MARKET
PERFECT COMPETITION
MONOPOLISTIC COMPETITION
IMPERFECT COMPETITION
MONOPOLY
OLIGOPOLY
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MONOPOLISTIC
COMPETITION
Referstoamarketorganization
Fairly large numberof firmsSellingcloselyrelated butnot
homogenousproducts.
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OLIGOPOLY
In economics ,a situation in which few
companies control the major part of a particular
market
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Anothermarkettype thatstands betweenperfectcompetitionandmonopoly.
Oligopolyisamarkettype inwhich:
Asmall numberof firmscompete.
Natural or legal barrierspreventthe entryofnew
firms.
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FEATURESt..
Small no of firms
Interdependence
Advertising and selling costs
Group behavior
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SMALL NUMBER OF
FIRMS In contrast to monopolistic competition and perfect
competition, an oligopoly consists of a small number
of firms.
Each firm has a large market share
The firms are interdependent
The firms have an incentive to collude
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INTERDEPENDENCE
When a small number of firms compete in a market,
they are interdependent in the sense that the profit
earned by each firm depends on the firms own actions
and on the actions of the other firms.
Before making a decision, each firm must consider
how the other firms will react to its decision andinfluence its profit.
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8/7/2019 Chapter 10 Monopolistic Competition, Oligopoly & Barriers to Entry
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TYPES OF OLIGOPOLY
Pure oligopoly-where sellers sell almost similar type
of product
Differentiated oligopoly-where firms are in the same
line of business but products may not be absolute
homogeneous
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EXAMPLES OF OLIGOPOL
Supermarkets
Banking industry
Chemicals
Oil
Medicinal drugs
Broadcasting
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IS OLIGOPOLY EFFICIENT?
In oligopoly, price usually exceeds marginal cost . So the
quantity produced is less than the efficient quantity.
Oligopoly suffers from the same source and type of
inefficiency as monopoly.
Because oligopoly is inefficient, antitrust laws and
regulations are used to try to reduce market power and
move the outcome closer to that of competition and
efficiency.
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CONCLUSION