What are the impacts for companies involved in an oligopoly market? How does being in an oligopoly affect their profits?

The impact for companies involved in an oligopoly are as beneath:

1. Since the companies operating in the oligopoly market restrict their output to raise the price; therefore, all the companies in this market form operates at a point less than the efficient level.

2. Also, the number of firms affects the marginal analysis of each firm in the oligopoly market. That is, if there are larger the number of oligopolists in the market, then there are fewer concerns about their impact on the market price; hence, in this case, the firms would behave more like a price taker due to the absence of the price effect.

3. Similarly, if there are fewer companies in the oligopoly market, then there will be no output effect, rather there will be a price effect.

Oligopoly market also has an impact over the firm's profit which is as follows:

1. If this market has fewer firms, then they can charge a price above the marginal cost; therefore, profit will be higher in this case.

2. If this market has a large number of firms, then they behave more like competitive firms and can charge prices slightly greater than the marginal cost; therefore, profit will be lower in this case.