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How is McDonald’s considered a oligopoly?

by on May 3, 2012

McDonald’s is not considered a monopoly since it is not a single seller of a good or one that is unique. It is noticeable however, that McDonald’s is one of the leading companies in the fast food industry, both in the U.S and internationally. It is one of the leading companies in selling burgers along with Burger King, KFC, and others. These facts show how McDonald’s is considered an oligopoly, as it is one of the few firms dominating the industry it is in.

McDonald’s is one of the many firms that are under the economies of scale. There are many barriers of entry to get into the hamburger industry and market. McDonald’s  has along-run average total cost that decreases whenever the size of the firm or operations increase. While others are buying franchises, McDonald’s is lowering their average total cost by expanding the size of their firm. This allows McDonald’s to make it harder for new entries to make it into the fast food industry.

McDonald’s use a key component known as  interdependence to rely on the actions of other businesses. Strategic dependence is rather common in the fast food industry. McDonald’s does this so they can predict the movements of other businesses. By predicting their movements, McDonald’s is able to make a strategy to become and stay successful.

In what other industries does McDonald’s compete with other restaurants?

http://libbyaanoosterr.wikispaces.com/McDonald’s+-+An+Oligopoly

 

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One Comment
  1. msmuntz permalink

    You provide good information, but your explanation doesn’t always make sense:
    “McDonald’s has along-run average total cost that decreases whenever the size of the firm or operations increase.”–I am not sure what you mean.

    You only cite one source; which looks like it might be someones school project and it looks like your post is simply a summary of what you read there. This is not acceptable. I expect you to do your own application of economic principles, not summarize an existing article. Next time you will not get credit for this type of “research”.

    I am not sure what your follow up question means.

    7/10

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