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State three features of oligopoly.

Answer» <html><body><p></p>Solution : The main features of oligopoly are as follows: 1) Few firms: Under oligopoly, there are few large firms. The exact no. of firms is not defined. Each firm produces a significant portion of the total output. There exists severe <a href="https://interviewquestions.tuteehub.com/tag/competition-423521" style="font-weight:bold;" target="_blank" title="Click to know more about COMPETITION">COMPETITION</a> among different firms and each firm <a href="https://interviewquestions.tuteehub.com/tag/try-1428546" style="font-weight:bold;" target="_blank" title="Click to know more about TRY">TRY</a> to manipulate both <a href="https://interviewquestions.tuteehub.com/tag/prices-1165311" style="font-weight:bold;" target="_blank" title="Click to know more about PRICES">PRICES</a> and volume of production to outsmart each other. 2) Interdependence: Firms under oligopoly are interdependent. Interdependence means that actions of one firm affect the actions of other firms. A firm considers the action and reaction of the rival firms while determining its price and output levels. A change in output or price by one firm evokes reaction from other firms operating in the market. 3) Non- Price Competition: Under oligopoly, firms are in a position to influence the prices. However, they try to avoid price competition for the fear of price war. They follow the policy of price <a href="https://interviewquestions.tuteehub.com/tag/rigidity-623827" style="font-weight:bold;" target="_blank" title="Click to know more about RIGIDITY">RIGIDITY</a>. Price rigidity refers to a situation in which price tends to stay fixed irrespective of changes in demand and supply conditions. Firms use other methods like advertising, better services to customers, <a href="https://interviewquestions.tuteehub.com/tag/etc-975753" style="font-weight:bold;" target="_blank" title="Click to know more about ETC">ETC</a>. to compete with each other.</body></html>


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