Is this economic situation providing positive profits?
"Consider the following hypothetical market structure information for gadgets. There are 6 firms in the U.S. that produce gadgets. Gadgets come in different shapes, sizes, textures, aromas and colors. The largest firm represents 50% of the total U.S. market for gadgets. The top four firms together represent 90% of the total U.S. market for gadgets.
What type of market structure is this? Can it earn positive economic profits in the long-run? Why or why not?"
Any help would be greatly appreciated. Thanks.
Answer:
This is an oligopoly and I don't know if there is a chance it can earn positive economic profits...I think that this is not enough information because you have to have opportunity costs and level of risk.
I agree with the previous answer that this is more like oligopily than any of the most commonly covered market structures. The fact that one firm has 50% of the market reminds me of Stackelberg's model of a dominant firm with a competitive fringe. In that model the dominant firm earns positive economic profit but the other firms earn zero economic profit.
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