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1)What are the characteristics of an oligopoly market? 2)Suppose the market for Apple Watches is currently in equilibrium
1)What are the characteristics of an oligopoly market?
2)Suppose the market for Apple Watches is currently in equilibrium. Then, workers at Apple's factories go on strike and demand a wage increase. This raises the cost of producing each Apple Watch. What happens to price and quantity for Apple Watches in the new equilibrium? Draw a graph with the initial equilibrium price and quantity and the new equilibrium price and quantity.
Expert Solution
1)The features of Oligopoly are as follows:
a. Interdependence: The firms depend on other firms for decision making. This is especially because there are few players in the industry. The strategic decisions are made after analyzing the moves of other firms so that the firm makes maximum benefits.
b. Group behavior/ Possibility of collusion:
In such type of a market, the firms can also opt to act in collusion so that the industry can jointly make profits. Working in collusion helps the firm to achieve goals according to their optimum potential. (It is similar to the prisoner's dilemma)
c. Barriers to entry:
The firms set up barriers to hinder the entry of other firms. Such barriers may include patents, geographical restrictions. etc
d. Selling cost:
Selling cost is the cost that the firm incurs to increase the sales of the product. This includes costs incurred for advertising, product differentiation, and branding.
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