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Chapter 8: Problem 1

Define: a. oligopolistic market b. cartel agreement c. price discrimination

Short Answer

Expert verified
An oligopolistic market refers to a market dominated by a few large sellers. A cartel agreement is a formal agreement between companies to limit competition and maintain high prices. Price discrimination is the practice of charging different prices to different consumers for the same product or service, based on factors other than production costs.

Step by step solution

01

Defining Oligopolistic Market

An oligopolistic market is a market structure characterized by a small number of large sellers who dominate an industry. These sellers are 'price makers' and have the ability to directly affect the price of goods in the market. Examples could include the airline or automobile industries.
02

Defining Cartel Agreement

A cartel agreement refers to a formal or explicit agreement between a few companies within an industry to limit competition among them and maintain high prices. This could involve agreements on price fixing, market shares, or bid rigging. A well-known example of a cartel is the Organization of Petroleum Exporting Countries (OPEC).
03

Defining Price Discrimination

Price discrimination is a pricing strategy where a company charges different prices to different consumers for the same good or service, not due to the cost of production, but due to variations in consumer's willingness to pay, their income level, location, or other factors. Examples may include airline ticket prices or theatre ticket prices.

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Most popular questions from this chapter

How might monopolistic competitors' products be slightly different?

Why might a firm that voluntarily entered into a cartel agreement decide to cheat on (or breach) the agreement?

When it comes to determining the quantity of goods to produce, how is a monopolist like a perfect competitor?

Identify an action of a real-world monopolistic competitor that is trying to turn itself into a monopolist.

What conditions are necessary before a seller can practice price discrimination?
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