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Describe how economies of scale can determine market structure. That is, if the minimum efficient scale is very high, would you expect that market to be closer to oligopoly (few large firms) or perfect competition (many small firms)? If the economies of scale persist over the entire range of output for which there is demand, what type of market would we expect to see emerge (can you give an example of an industry that resembles this market structure)?

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Kritika Krishnakumar
Kritika KrishnakumarLv10
28 Sep 2019

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Related questions

Economies of scale can lead to an oligopolistic market structure because:

a. if larger firms have lower average costs, new small entrants will not be able to produce at the low costs achieved by the big established firms

b. if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms

c. a few firms can force rivals to produce at low levels of output

d. a few firms can use high profits to keep out new entrants

If an industry has no barriers to entry, no product promotion strategy, a standardized product type, and a very large number of firms operating within it, the industry can be said to have

Select one:

a. a monopoly market structure.

b. perfect competition.

c. differentiated market.

d. monopolistic competition.

e. an oligopoly market structure.

The long-run average-cost curve

Select one:

a. connects the minimum points of all the short-run average-total-cost curves.

b. connects the maximum points of all the short-run average-total-cost curves.

c. connects minimum points on the short-run total-cost curves.

d. indicates the most efficient scale of operation for a given level of output.

e. is the most efficient scale of operation.

A few large companies, and a few small companies. The competition still exists amongst these firms in terms of product/service, etc. What one firm does will impact others. Entry and exit into these industries are difficult. Why? Because economies of scale have been established already, making it very expensive for other firms to enter into the industry. A branch of oligopoly is called a Cartel --- the same attributes of an oligopoly, however, there is now cooperation within the firms (cooperation with output, marketing, and distribution).

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