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\subsubsection{Indicators of an Oligopoly}  There are four dominant indicators to see if an oligopoly exists within a market. The first of these is what is known as firm interdependence where and price rigidity. In an ideal situation, from the point of view of a firm operating within an oligopoly, a firm would know the price at which other operating firms plan to set their products at. This is because of the effect the price of other firms' product will have on the quantity produced and sold of an individual firm. The kinked demand curve shown below will indicate as to why this is the case. In order for the following explanation to be coherent and concise, definitions of the following terms will prove beneficial. Price elasticity of demand can be defined as the level of responsiveness of demand based on a change in price. Marginal revenue can be defined as the additional revenue gained from one additional unit of output. Marginal cost can therefore be defined as the cost of producing one additional unit of output. Average revenue may be defined as the revenue gained from each unit that is sold. It can be expressed as the formula: $TR/Q$ As shown on the kinked demand curve, the demand curve above Price 1 is very elastic. This means that there is a greater than proportional change in quantity demanded for a change in price. Practically, this means that if a firm in an oligopoly raises its price for a good, the quantity consumed demanded  will rapidly decrease. This is due to the substitution effect; if the price of a good increases, consumers will instead choose to buy similar goods at a lower price from other firms who have kept their prices constant (i.e. at a lower price than the aforementioned firm's new price). Therefore, not only will the average revenue decrease (as quantity demanded has decreased at a higher rate than the price units sold at has increased), but also total revenue, (expressed as $P*Q$) as the quantity demanded has has decreased at a much more rapid rate than price has increased. The second thing to note is that below PL1 on the diagram, the demand curve is very inelastic. This is because for a large change in price, there is a small change in quantity demanded. This may seem somewhat counter-intuitive; if the price of one of the firms' goods is below the usual price for all firms, one would deduce that there would be a large change in quantity demanded, again due to the substitution effect. However, this is not what happens in reality. When one of the firms changes its price for a good, other firms will respond, in order to be competitive with the firm offering consumers the lowest price. Over a short period of time, all firms are engaged in a 'price war' or 'bidding war' and the price rapidly continues to decrease. This also means that the average and total revenues will decrease when the price is below the 'industry standard' price i.e. the price and quantity that yield maximum profit. It is, therefore, in the interest of all firms in an oligopoly to keep their prices constant. However, this may lead to inefficiency. If costs of production to a supplier decrease, supply will shift out and to the right, meaning that a greater quantity is supplied at a lower price. However, because the profit maximisinthe  Abnormal Profit. Therefore the price elasticity of demand above point PL1 will be very elastic, i.e. the responsiveness of demand to a change in price is very high. Collusion of firms for a stable of price. Barriers to entry. \subsubsection{Types of Inefficiency}