You need to be familiar with the diagrams for each type of market structure. Oligopolies occur when there are a few large firms dominating the market. An example might be supermarkets or car manufacturers where four or five large firms dominate the market.
Having a number of firms each with market power complicates the analysis as we cannot say for certain what the firm will do. Unlike perfectly competitive firms, who must simply take the market price, oligopolies are interdependent. Their decisions affect each other. They can either collude and maximise their joint profits, or compete. Either way, prices may be similar and stable so it might be hard to tell which is happening.
If firms do compete, the presence of a kinked demand curve may mean they compete on something other than price. If they were to raise prices, no other firm would follow and so they lose customers (the demand curve is price elastic) but if they lower prices, all their competitors will be forced to do so too and they gain little (the demand curve is inelastic). For this reason firms in such a situation will tend to leave price unaltered and instead compete on added extras, reward card schemes, quality of the product etc.
The tutorial below will lead you through drawing the diagram step by step. You may wish to make sure you understand the monopoly diagram first.
Unfortunately at the moment the tutorials are only available using flash so they may not work on mobile devices.
You need to be familiar with the diagrams for each type of market structure. Monopoly markets occur when one single firm dominates the market. Large firms with some competition can have a degree of monopoly power but when it comes to diagrammatic analysis we are interested in a situation where one firm has 100% market share.
Barriers to entry allow monopolies to make long run abnormal profit that is not competed away by new entrants into the market as it would have been under Perfect competition This tutorial will talk you though drawing the diagram for a monopoly. Before you look at it I suggest that you make sure you are happy with demand and supply diagrams and the profit maximising condition MR=MC. If you are not they you can search for pages about them using the button on the top right of the menu.
Unfortunately at the moment the tutorials are only available using flash so they may not work on mobile devices.