Question

Oligopolies have substantial barriers to entry and exit. With these barriers come high prices for consumers. Do you think this means it good to have less competition?

Answer 1

When there is less competition in the market, it is always going to help the producers and not the consumers. this is because every producer in the market enjoys sufficiently higher market power when it is able to restrict entry of other producers. oligopolies are not better than competitive markets because the price faced by the consumer is higher, the quantity supplied is reduced, and there is a big deadweight loss in terms of lost consumer surplus. Therefore it can be asserted that it is not good to have less competition, in effect, competition reduces the cost of production increases efficiency and therefore helps in maximizing the overall surplus in the market.