Question

How can you find producer surplus, consumer surplus, total surplus in a oligopoly? Also provide a...

How can you find producer surplus, consumer surplus, total surplus in a oligopoly?
Also provide a graphical explanation.

Homework Answers

Answer #1

An oligopoly has some of the characteristics of a monopoly, in that its members can charge higher than normal prices and make higher than normal profits. The particular characteristics of an oligopoly are, 1 It consists of a relatively few, relatively large, sellers 2. Each firm is big enough to affect the others. 3: The products are similar or identical. 4: There are barriers to entry, such as initial capital costs. Now, with the help of the following diagram , an oligopoly market can be explained along with producer surplus and consumer surplus.

Supply equals demand and the equilibrium point is at e, and surplus is divided between consumer and producer. The area of total surplus is the total of area of producer and consumer surplus.

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