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Answer to Question #76859 in Other Economics for SHEHZAAD

Question #76859
6.1 State ANY FIVE (5) distinguishing characteristics of an oligopoly market structure. (5 marks)
6.2 Briefly discuss the shortcomings of the kinked demand curve model of the oligopoly market structure. (5 marks)
6.3 With the aid of fully labeled diagrams, explain how a perfectly competitive firm adjusts to earning only normal profits in the long run from a position of economic profit/loss in the short run. (10 marks)
Expert's answer
6.1 The five distinguishing characteristics of an oligopoly market structure are interdependence of firms, barriers to entry, competition, group behaviour and advertising.
6.2 The kinked demand curve model assumes that a business might face a dual demand curve for its product based on the likely reactions of other firms to a change in its price or another variable
6.3 A perfectly competitive firm adjusts to earning only normal profits in the long run because the number of firms entering the industry rises/falls if they receive economic profit/loss in the short run, the market price falls/rises until all firms receive only normal profits in the long run.

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