Cambridge OCR A Level · Economics - H460

Oligopoly: Practice Questions

4 multiple-choice questions marked as you go, and 2 written questions with worked solutions. All on Oligopoly.

6 questions13 marksFree, no account

Question 1

1 mark

A market has a 4-firm concentration ratio of \(85\%\). What does this value most likely indicate about the market structure?

Question 2

1 mark

In the kinked demand curve model of oligopoly, why is the demand curve more elastic for price increases than for price decreases?

Question 3

1 mark

In an oligopolistic market consisting of five firms, the annual sales revenues are as follows: Firm A (120m), Firm B (80m), Firm C (50m), Firm D (30m), and Firm E (20m).

If Firm B and Firm C undergo a horizontal merger, what is the new 3-firm concentration ratio (CR_3) for this market?

Question 4

1 mark

In an oligopolistic market, what is the most likely reason why firms engage in non-price competition, such as advertising or branding?

Question 5

4 marks

Explain the concept of interdependence in an oligopoly and how it relates to the use of a kinked demand curve diagram.

Write your answer out first, then check it against the worked solution.

Question 6

5 marks

The market for domestic energy is dominated by five large firms. These firms are highly interdependent and often engage in non-price competition.

(a) Explain the term 'interdependence' in the context of an oligopoly.
(b) Describe how a kinked demand curve explains price stability in this market structure.
(c) Evaluate one advantage and one disadvantage of an oligopoly market for a consumer.

Write your answer out first, then check it against the worked solution.

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