Many oligopolies are successful in earning economic profit year after year. Identify and explain what characteristic of oligopoly is most responsible for the presence of long-run economic profits.

Question

Jada

Business

6 December, 17:23

Many oligopolies are successful in earning economic profit year after year. Identify and explain what characteristic of oligopoly is most responsible for the presence of long-run economic profits.

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Hayden Bradley · Answer 1

Answer and explanation:

An Oligopoly takes place when a market is controlled by a small group or two or more firms. Businesses in an oligopoly can agree to price collusion and create barriers to entry for new commerce. If the businesses do not, they would likely be forced to lower their prices and open the market for newer smaller firms.

Thus, barriers to competitor entry are the key factor that allows oligopolies to keep their prices at a certain level which ensures profits are steady over time.