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21 May, 22:05

Col1 Firm A B C D E

col2 Market Share (%) 40 30 20 5 5

Refer to the data. Suppose that enforcement of antitrust laws resulted in any firm in this industry with market share above 20 percent to be split into two firms, with each having equal market share. That would cause this industry toa. remain an oligopoly. b. change from monopolistic competition to oligopoly. c. change from oligopoly to monopolistic competition. d. remain monopolistically competitive.

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  1. 21 May, 22:55
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    Answer: a. Remain an Oligopoly.

    Explanation:

    An Oligopolistic Market is one where there are few sellers controlling most of the industry.

    Even if the anti-trust laws are strictly enforced, it still only remain a Oligopolistic industry.

    Why?

    The Only companies that will be affected are A and B.

    A will split to 2 companies and so will B.

    What will then happen is that 90% of the market is still controlled by 5 firms being A1 and A2 at 20% each. B1 and B2 at 15% each and C at 20%.

    These 5 firms could still control price so this market is Oligopolistic.
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