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Chapter 12: Problem 16

Jennifer Ziegenfuss owns a firm that manufactures cell phones that double as garage door openers. Another firm, owned by Jared Collins, produces the same product. A third firm, owned by Daniel Quinn, also makes this product. The only other firm manufacturing cell phone-garage door openers is owned by Robert Roan. This industry is a(n)

Short Answer

Expert verified
The industry in which Jennifer, Jared, Daniel, and Robert operate is an oligopoly, as there are only four firms manufacturing cell phone-garage door openers, and they all produce the same or very similar products.

Step by step solution

01

Identify the Characteristics of the Firms and Industry

In this situation, there are four firms manufacturing cell phone-garage door openers. These firms all produce the same product.
02

Review the Types of Market Structures

There are four main types of market structures: 1. Perfect competition: Many firms produce identical products, and there are no barriers to entry or exit. 2. Monopolistic competition: Many firms produce similar but not identical products, and there are few barriers to entry or exit. 3. Oligopoly: A small number of firms dominate the market, producing either identical or differentiated products. There are significant barriers to entry. 4. Monopoly: One firm dominates the market, producing a unique product with no close substitutes. There are significant barriers to entry.
03

Compare the Characteristics of the Industry to the Market Structures

In this case, there are only four firms producing the product, indicating that there is a limited number of firms in the industry. The fact that they all produce the same product suggests that the products are either identical or very similar. This information aligns most closely with the definition of an oligopoly market structure.
04

Determine the Market Structure

Based on the information provided, we can conclude that the industry in which Jennifer, Jared, Daniel, and Robert operate is an oligopoly. There are only four firms manufacturing cell phone-garage door openers, and they all produce the same or very similar products.

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