Question

One of the criticisms of oligopolies is the adverse impacts these firms have on income distribution. Do you believe that is a valid criticism? Discuss with appropriate examples

Answer 1

Answer: Oligopoly term is a greek word formed with words "Oligo" means few and "polin" means to sell.

Hence Oligopoly is a market structure in which few firms dominate the production and selling process with some effective barriers for entry into the market for new firms .

In other words, it is such market practice which hinders perfect competition in market.Oligopolistic firms charges a higher price and produces less products compared to the standards of perfect competition.As a result of this , its resultant is inefficient allocation of resources in the market.As With high level of controls in production and selling processes, wealth get to concentrate into few hands and income tends to be placed in few hands.

Hence criticism of Oligopoly that adverse impacts these firms have on income distribution os truly valid.

Various examples supports are:

1.Automobile manufacturing As few firms dominate the market with big brand names and it restricts the entry of new firms in the market.

Hope it helps.

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