When it comes to being in an oligopoly, many things must be considered. Since oligopolies are a small number of firms, this means there is a small number of resources available for new firms to join the industry. This is beneficial to most firms because they do not have to worry about new firms that may have the opportunity to take their consumers. This is also not beneficial to the firm because there are many government restrictions for these firms as well. A firm may even encounter a merger, there are two types a mergers: a horizontal merger which is when two firms in the same industry decide to become one, and a vertical merger which is when two companies come together to make one product. A horizontal merger increases the barriers to entry because by combining into one firm the market share of the firms combined will increase greatly. A vertical merger will cause the firms to reach out to specific firms they would like, meaning firms trying to enter will not have the opportunities to approach these firms. Any type of merger is risky so when a firm decides to do anything like this, they must make the correct types of …show more content…
Meaning the amount of money it costs to create a product equals how much is being profited from a product. This is the general rule for hiring, because this is when the firm is not losing money, so by hiring it will not cause the firm to lose money. There are four determinants of elasticity for MRP, number one: the greater the elasticity of demand for the final product, the greater the demand for labor. Meaning, when more of a product is wanted by consumers, more laborers are required to help produce the product. Number two: the easier it is to find a substitute factor. Meaning if it is easier for a consumer to find a substitute product, they will be more likely to purchase that product thus decreasing the elasticity for labor. Number three: the larger the percent of total cost accounted for by factor.
If the percent of the total cost accounted for by factor increases then it will decrease elasticity for labor demand, because it will cost a firm more to create the product. Lastly, number four: length of time allowed for adjustment. This is referring to the amount of time available for a firm to correct an issue on a product. If a product is having an issue with a product then the elasticity for labor will increase to get the issue fixed as soon as