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Why do you think most of the industries today are oligopolies?

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Q. Why do you think most of the industries today are oligopolies? Oligopoly is a market structure in which there are a few large firms with a concentrated market share, an example of an oligopoly today would be Nike, Reebok and Adidas for shoes. Most industries today are oligopolies, the possible reasons for this would be that oligopolies in contrast to monopolistic competition would be able to earn abnormal profits in the long run as well as the short run, as shown in the previous section The reason for this is that there are barriers to entry and exit to potential firms. ...read more.


would be making much better use of it as they are operating on a larger scale, but new firms will face high costs in employing the new technology, thus they would have to price their products differently. These are just a few of the potential barriers that could exist, and they deter new firms from entering the industry thus existing firms enjoy abnormal profit in the long run. This would prove to be a major incentive for firms to become oligopolistic in nature. This extra abnormal profit that is earned in the industry is used for research and development of new and improved products, this is done either collectively by all the firms in the industry or independently. ...read more.


Secondly, firms choose not to become monopolies because although they create an ideal situation for complete market domination and huge profit generation, they are considered to be inefficient and inequitable by governments. Governments are usually very strict over watching, controlling and breaking up monopolies, they set up "watch dogs" to observe the practices of monopolies and if suspected they a broken up and sold off. Thus by being an oligopoly, firms can generate a reasonable amount of revenue and avoid the danger of being watched over and being split apart. Oligopolies therefore enjoy the best of both market structures so to speak, so it's no wonder that most industries are oligopolies in today's world. ...read more.

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