Assessment item 4
Assignment 4: Essay Question
Value: 10%
Length: Approx 2,000 words
Submission method options: Alternative submission method
Task
Assignment 4 consists of one essay question (worth 10 marks) based on text material. Before
attempting this assignment you are expected to have read Text chapters 1 to 10. You are
encouraged to make use of additional sources. Sources used in your answer should be fully
referenced in APA 6th style.
Answer the following question ensuring that you apply economic principles or theory related
to the concepts of benefits, costs and market structure in which a firm operates to inform your
analysis and support your decisions. Communicate your ideas with correct grammar, spelling
and writing style and support your answer with diagrams and illustrative examples as
necessary.
Question (10 marks)
Drawing on your knowledge of the theory of market structure – supplemented by appropriate
media reports – comment on the statement of ACCC Chairman, Rod Sims, that the Australian
finance sector is ‘a cosy banking oligopoly’ and explain what action could be undertaken to
overcome the problems created by this situation.

Solution

Oligopoly Market Structure

The banking system of the Australia is predominantly controlled by four major banks which owns over 75% of the sector. This makes these banks to engage in oligopolistic activities such as setting the interest rates and makes the other small banks to be price takers. the rates that they set are low so as to eliminate the small banks from operating. The chairman of the ACCC is therefore very right to refer to the four main banks controlling the Australian banking sector as cosy since the banks have colluded to frustrate the small banks in the market so that they can continue controlling the market share and oppress the consumers.

Oligopoly market structure diagram; from the diagram, it is clear that the market is made of a few entities that dominate industry operations. Even if the banking industry in Australia is mainly dominated by a few large players, there are other smaller ones which operate and introduce competition. Citing the Australian banking sector, it is clear that oligopoly business firms do not compete with each other (Park, Cachon, Lai & Seshadri, 2015). For example, Westpac may decide to decrease banking charges in a bid to attract a wider pool of potential customers that other players in the industry. ANZ bank does the same so that there is a common platform of earning profits in the industry and the competition is therefore kept at a bare minimum…………………………….To access the rest of the solution for $10, please click on the purchase button.