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Which of the following market are oligopolistic? a)  Corn b)  Funeral Services c) ...

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yaga49 | Valedictorian

Posted June 9, 2013 at 11:25 AM via web

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Which of the following market are oligopolistic?

a)  Corn

b)  Funeral Services

c)  Airline Travel

d)  Hamburgers

e)  Oil

f)   Breakfast Cereals

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted June 9, 2013 at 1:47 PM (Answer #1)

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In the United States, three of these markets would be considered to be examples of oligopolies.  These are the markets for C) airline travel, E) oil, and F) breakfast cereals.

The main characteristic of an oligopoly is that there are only a very few firms that control the large majority of the market.  These firms each have a significant share of the market as a whole and their actions affect one another because they are so big.  The firms can be big because there are serious barriers to entry.  Each of the examples given fits this. 

In the airline travel industry, there are only a few major airlines in the US.  There are many smaller, regional airlines, but they are scattered around the country and are generally affiliated with the larger airlines.  In the oil business, there are only a few companies left that extract oil and sell it.  The main barrier to entering these two markets is the fact that they are extremely expensive to get started in.  By contrast, the cereal market is not that expensive to participate in.  The problem there is that people get to be very loyal to specific brands and therefore it is hard for a new brand to gain traction.  For this reason, most of the cereals are made by a few major companies.

Thus, these three markets are oligopolies in the United States.

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