Q:

What are the advantages and disadvantages of oligopolies?

A:

Quick Answer

Oligopolies are usually seen as being negative to the general public. There are certainly disadvantages of oligopolies, including reduced consumer choice. However, the disadvantages are also matched with some advantages, including price stabilization.

Know More

Full Answer

An oligopoly occurs when an industry, such as the automobile industry, has few competitors.

Most of an oligopoly's disadvantages are matched with an equal advantage. Many times, there are so few competitors because companies in the industry make it next to impossible for new companies to break through.

Because consumers have so few choices in an oligopoly, the companies generally have no incentive to keep prices low, so consumers usually spend more for the goods or services. However, this lack of competition can work to stabilize prices so that they don't fluctuate and surprise consumers, allowing them to plan ahead for large purchases.

Businesses involved in an oligopoly may not have great incentive to be efficient in their production of goods and services, which can lead to consumer frustration. Because of the greater amount of time companies have to work on production, though, they are more able to be innovative in their approach to production. This paves the way to new inventions and more stable goods and services.

Learn more about Economics

Related Questions

  • Q:

    What are some advantages and disadvantages of break even analysis?

    A:

    Break-even analysis allow managers to better determine what their goals should be, but it can cause them to not consider other factors. It is a core component of making business decisions. However, it must be used cautiously.

    Full Answer >
    Filed Under:
  • Q:

    What are the advantages and disadvantages of mercantilism?

    A:

    The benefits of mercantilism include increased employment, the development of new technologies and products, and positive cultural exchanges as mercantilist nations seek new markets and raw material sources, whereas the disadvantages of the system include increased conflict between nations, growth in trade protectionism and the development of trade monopolies. The Library of Economics and Liberty defines mercantilism as a form of nationalism aimed at building a wealthy and powerful state.

    Full Answer >
    Filed Under:
  • Q:

    What are the advantages and disadvantages of niche marketing?

    A:

    The advantages of niche marketing are focusing on more profitable market segments, ability to establish solid relationships with members of a market segment and increased return on investment for marketing dollars. Disadvantages of niche marketing include increased difficulty in exposing a product to a broad spectrum of consumers, inability to create mass market appeal and limited sales potential. The effectiveness of niche marketing depends on the product.

    Full Answer >
    Filed Under:
  • Q:

    What are the advantages and disadvantages of ASEAN?

    A:

    Advantages of the Association of Southeast Asian Nations include the elimination of tariffs between member states, which has reduced product prices due to increased competition within the market, and possible investment opportunities in the market. Among the disadvantages of ASEAN are the risk of an influx of cheap imports flooding local markets and the existence of poor governance structures in some member countries.

    Full Answer >
    Filed Under:

Explore