1. Do you think that in oligopolies, economic profits in the long run can be positive...

1. Do you think that in oligopolies, economic profits in the long run can be positive – please discuss in detail and provide examples.

2. Find two companies and discuss they fall for oligopolies – justify your reasoning.

Expert Solution

In oligopoly market, economic profits can be positive in long run as there sizeable barriers to entry for new firms to compete, lesser firms reducing competition and firming up prices to levdl which drives profit, better cartelisation and consolidation leading to cost synergies. In US Telecommunications market, four firms mainly Tmobile - Sprint, Verizon and AT&T enjoy larer profits and in future shall continue because it takes mamoth expenditure and expertise for new firms to enter and survive and compete woth larger firms and hence their profits are exponentially higher.

Companies like Vodafone and Idea in Indian Telecom markets have fallen miserably despite being Oligopolistic market structure as other two firms have rapidly expanded with capex and opex plans and have garnered market share causing erosion of customer base for Vodafone Idea and thus higher losses and debt burden and ultimately on verge of bankruptcy and unsustainability.

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Rahul Sunny answered 11 months ago

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