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LOSS MINIMIZATION, MONOPOLY: The marginal revenue and marginal cost approach to analyzing a monopoly firm's short-run production decision can be used to identify economic loss. The U-shaped cost curves used in this analysis provides all of the information needed on the cost side of the firm's decision. The demand curve facing the firm (which is also the firm's average revenue curve) and the firm's marginal revenue curve provides the information needed on the revenue side.
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                           OLIGOPOLY, REALISM: Real world markets are heavily populated by oligopoly. About half of all output produced in the U.S. economy each year is done so by oligopoly firms. Other industrialized nations can make a similar claim. Oligopoly markets arise in a wide assortment different industries, ranging from manufacturing to retail trade to resource extraction to financial services. Oligopoly markets provide a veritable who's who of business firms in the United States and throughout the global economy. Any listing of oligopolistic industries, let alone specific oligopolistic firms, is bound to be incomplete. However, here is a partial list.AutomobilesAt the top of the list is the market for cars, which has been one of the most important industries in this country for decades. A handful of firms--especially General Motors, Ford, Chrysler, Honda, and Toyota--account for over 90 percent of the cars, trucks, vans, and sport utility vehicles sold in the United States. The need for large factories, a nation-wide network of dealerships, and brand name recognition create entry barriers that limit production to a few large firms.PetroleumAn industry closely tied to the market for cars is the extraction and refinement of petroleum. A few representatives in this market include ExxonMobile, ConocoPhillips, Gulf, and Shell. While the petroleum industry contains hundreds, if not thousands, of smaller firms, the biggest ones tend to dominate the market. In addition, another major player on the international scene is the Organization of Petroleum Exporting Countries (OPEC), which is an international cartel representing several petroleum-rich countries especially in the Middle East. Ownership and control of petroleum resources is a prime factor in the creation of an oligopolistic industry. TiresAnother industry closely connected to the automobile industry is the manufacture of tires. Every car needs tires. This industry is also dominated by a small number of familiar firms as well, including Goodyear, Firestone, Goodrich, Uniroyal, and Michelin. The number of firms in this industry is also limited by the need for large factories.ComputersAn increasingly important market is that for personal computers. The manufacture of computers tends to be dominated by a small number of firms, including Dell, Hewlett-Packard, Gateway, Apple, and IBM. In the early years of the computer revolution (1970s and 1980s), numerous firms entered the market (Kaypro, Osborne, Packard Bell, Compaq, Texas Instruments), then went bankrupt, merged with other firms, or simply stopped offering personal computers. Although entry barriers are not insurmountable, brand name recognition and the need for manufacturing facilities tend to limit the entry of other firms.BankingA market that is becoming increasingly oligopolistic is banking. While the United States has a total of approximately 20,000 banks, a small contingent of firms tends to dominate the national market. Names include Citibank, Bank of America, Wells Fargo, Bank One, and MBNA. Moreover, most banking is done at the local level and most cities generally have no more than a handful of firms, including these national firms, that provide banking services. The key entry barrier that limits the number of firms in the banking industry is government authorization. Before a firm can provide banking services, it must obtain a government charter.Wireless TelephoneThroughout much of the 1900s, the only company providing telephone services was AT&T. Technological advances and regulatory changes enabled the development of an oligopolistic market for wireless telephone services (cell phones). AT&T has been joined by a small number of other companies, including Verizon, Cingular, Sprint, T-Mobile. The need for a nation-wide network of relay towers makes this industry well suited for a small number of large companies.TelevisionWhile television sets are filled with hundreds of television channels, only a handful of companies dominate the market. The big players, including Disney (ABC, ESPN, Disney), Viacom (CBS, UPN, MTV), General Electric (NBC, Bravo, CNBC), Time-Warner (HBO, WB, CNN, TBS), and News Corp. (Fox, FX, Fox News), own and control many of the channels. (These companies also play major roles in related markets--including motion pictures, cable systems, radio and television stations, and newspapers.) Domination by a few firms arises due to the upfront costs of producing programming and acquiring satellite relay access.AirlinesThe airline industry has long been dominated by a small number of firms. Throughout the middle part of the 1900s, seven firms dominated the U.S. market--American, United, TWA, PanAm, Continental, Braniff, and Eastern. However, deregulation in the 1980s lead to decades of changes. Some airlines folded. New airlines emerged. Even though changes continue, the industry remains dominated by a small number of competitors--American, United, Southwest, Delta. Heavy expenses needed to purchase planes, establish flight routes, and acquire terminal space tends to limit the entry of new firms.
Recommended Citation:OLIGOPOLY, REALISM, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 18, 2025].
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