Which of the following industries would most likely have the characteristics of an oligopoly? Question 43 options: 1) Make-up 2) Cameras 3) Clothing 4) Restaurants 5) Automobiles
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Step 1: Define oligopoly — an industry market structure with a few large firms that dominate the market, high barriers to entry, firm interdependence (each firm’s pricing/production decisions affect the others), possible product differentiation, and frequent Show more…
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Sanchit J.
The accompanying table shows the HerfindahlHirschman Index (HHI) for the restaurant, cereal, movie, and laundry detergent industries as well as the advertising expenditures of the top 10 firms in each industry. Use the information in the table to answer the following questions. $$ \begin{array}{l|r|c} \text { Industry } & \text { HHI } & \begin{array}{c} \text { Advertising expenditures } \\ \text { (millions) } \end{array} \\ \text { Restaurants } & 179 & \$ 1,784 \\ \text { Cereal } & 2,098 & 732 \\ \text { Movie studios } & 918 & 3,324 \\ \text { Laundry detergent } & 2,068 & 132 \end{array} $$ a. Which market structure-oligopoly or monopolistic competition-best characterizes each of the industries? b. Based on your answer to part a, which type of market structure has higher advertising expenditures? Use the characteristics of each market structure to explain why this relationship might exist.
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