Oligopoly

The exam loves to make you match a model to an outcome. The tell is a phrase like “firms set output simultaneously” (Cournot), “identical products, price-cutting to marginal cost” (Bertrand → the zero-profit “Bertrand paradox,” broken by differentiation or capacity limits), or “a firm fears matched price cuts” (kinked demand → sticky prices from a gap in the marginal-revenue curve). A second favorite asks who has the most pricing power: rank it perfect competition < monopolistic competition < oligopoly < monopoly, and note a dominant oligopolist’s pricing depends on its market share and how elastic its buyers are.

The classic trap is conflating oligopoly with monopoly: both can earn economic profit, but oligopoly’s defining feature is interdependence, not a single seller. And separate the kinked-demand model (explains why prices are sticky, not how the level got set) from collusion/cartels (explains the price level). Hook: “few firms, watching each other” — Cournot watches quantities, Bertrand watches prices.