Question

Read and analyze the response below. do you agree? why or why not? What do you think? explain. (5 Sentences Minimum)

In an oligopolistic industry, these firms are very big and they dominate the market due to its large quantity. To have entry and exit are high due to high fixed costs and supply chain issues. Both these conditions are satisfied in the beer industry, so it is considered an oligopoly.Even though there are dozens of independent firms, each firm occupies a sizable portion of US beer market, which signifies control over the market. In addition, fixed costs are high in terms of large vineyards that are required for beer production. This works as a barrier for entry to new firms. This explains why the industry is considered as oligopolistic. This industry is an example of an oligopoly because an eight firm concentration ratio which is over 90% is a indication of oligopoly and proves that these eight firms have significant market control and share in the market. The eight-firm concentration ratio is used to indicate the degree to which an industry is oligopolistic and the extent of control and share of these firms in the market which is quite large.

Answer 1

I agree to an extent but not fully.

the beer industry in the US is considered as an oligopoly because the firms operating in the market are dependent on each other for the strategic decisions like price setting, if one firm increase the price no one follows him but as he decreases the price the all firms will lower there. It is all dependent on each other. Apart form that its the large size but it is not due to the large vineyards but economies of scale which these firms have achieved over the years.

Moreover, they are large firms controlling the huge market is main reason for calling them an oligopoly. As the size of the market increases the number of firms in the monopoly will also increase.