ECO121

First Semester – First Grading

Essay
1. In your own words what is the disadvantage and advantage of oligopoly?

An oligopoly is a market structure in which a few large companies control all or almost all sales
in a specific industry and typically collude to limit competition. As a result, oligopoly provides
advantages such as reduced competition, superior customer service, a small number of firms makes it
easier for customers to evaluate and pick products, and a high potential for large profits, among others.
On the other side, it has disadvantages such as restricted customer choice, high entry hurdles, and firms
who are uninterested in advances due to a lack of competition. Furthermore, oligopolies may pursue a
highly competitive approach, in which case they might achieve benefits similar to those obtained by
more competitive market arrangements, such as lower pricing. Even if the market is uncompetitive
because there are just a few businesses, their conduct may be extremely competitive.

2. Illustrates the differences between a monopoly and perfect competition in ease of

The market in a perfect combination is made up of several businesses, with no single firm
controlling the market. Monopoly, on the other hand, is the polar opposite of perfect combination, with
just one business dictating the price and supply levels of products and services. The difference in ease of
entrance between the two is that it is simple for other businesses to enter a completely competitive
market, implying that there is even more competition, whereas entering a monopoly is prevented,
implying that there is freedom to enter or exit the market. On the other hand, because there is product
diversity between the two, monopolistic businesses must suffer selling expenses due to product
differentiation. Successful product diversification in perfect combination is incompatible with the
requirements of perfect competition, which require competing businesses' products to be perfect
replacements.
3. Give an example solution how Government makes a decision to increase the
minimum wage.

Wage indexation to cost of living, in which wages are automatically adjusted to cost of
living rises, is typically not fulfilled by the majority of businesses. According to Harry J. Holzer in
Time magazine, "Increasing Earned Income Tax Credits (EITC) offers a remedy to minimum wage
hikes that don't go far enough to aid those who need it most." Low-wage workers also receive EITC
tax credits and government refunds at tax time to encourage them to work

4. In what way economist help to grow our economy?

An economist is a person who examines how individuals make decisions and is interested in
using statistics to increase profits, improve public policy, or conduct research. Furthermore,
economists may assist since having more cash allows businesses to obtain financing, develop
technology, grow, and expand. All of these acts boost productivity, which boosts economic growth.
Proponents believe that tax cuts and refunds allow customers to stimulate the economy by injecting
more money into it.
Activity 2:
Trace the Relationship
 Assessment:

Identification
Monopol Oligopoly
 More efficient


1. Ratey
Defined by the presence of a
 Each company has only a little
amount of market power on its
single seller 2. Rental
 High barriers to entry own.
 The seller has no competitors
 Has many sellers  Has standardized product
3. Market
in his/her location
 Has a small number of firms in
 There is no way in or out
4.product
Perfect Competition or Pure a market
 Has an identical
 Maximizer of profit  A limited number of providers
 The shop is a short distance
away.
5. Monopoly  Price Maker dominate the market
 Discrimination in
6. Market StructurePricing
 May offer products
7-10. and services to the
 Unique Product
public
 oWillPerfect
act in a similar
Competition or Pure
manner in the short term  Barriers to entry and exit
 oFaceMonopoly
downward-sloping  Their behavior is very
competitive.
odemand curves
Oligopoly
o Monopolistic
 There are an unlimited number of
businesses.
 Several Businesses
 Produces similar products
 Demand Is More Elastic
 Competitive

Monopolisti
c