Which of the following is not a characteristic of an oligopoly?

Question

BlackTom AI · Accepted Answer

An oligopoly is characterized by a few interdependent firms that have some market power and face barriers to entry, so they can earn positive economic profits in the long run.

1) Relevant knowledge points and concepts
- Oligopoly: market structure with a small number of firms, strategic interdependence (firms’ decisions affect rivals), and barriers to entry that limit competition.
- Long-run economic profit: when firms sustain price above average total cost (ATC), they earn positive economic profits; free entry drives profits to zero only in perfectly competitive markets.
- Strategic decision-making and game-theoretic behavior (price rigidity, tacit or explicit collusion) are common in oligopolies.

2) Step-by-step reasoning process
- Step 1: Identify core features of oligopoly from definitions: few firms, strategic interactions, barriers to entry.
- Step 2: Compare with perfect competition: perfect competition implies free entry and zero long-run economic profit; oligopoly generally lacks free entry.
- Step 3: Determine which option contradicts typical oligopoly features: “Zero long-run economic profit” matches perfect competition, not oligopoly.

3) Intermediate calculation/demonstration (illustrative)
- Suppose two firms collude and set price P = $100, average total cost ATC = $70. Per-unit profit = $30 > 0. With limited entry, new competitors cannot freely enter, so this positive profit can persist in the long run. This simple numeric example shows that long-run profit need not be zero in oligopoly.

4) Why the correct answer is correct
- Zero long-run economic profit is not characteristic of an oligopoly because barriers to entry and market power enable firms to earn persistent positive economic profits. The zero-profit outcome is a hallmark of perfect competition, not oligopoly.

5) Why the other options are incorrect
- Strategic decision-making by firms: Correct characteristic—firms are interdependent and must anticipate rivals’ responses.
- Substantial, though surmountable, barriers to entry: Correct—barriers exist that protect incumbents but can sometimes be overcome.
- A small number of firms: Correct—oligopoly by definition involves few firms dominating the market.

6) Conclusion
Therefore, “Zero long-run economic profit” is not a characteristic of an oligopoly, which matches the provided answer.

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Which of the following is not a characteristic of an oligopoly?单项选择题

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希望你的学习变得更简单

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