Multiple Choice
A major threat to long term profits exists when barriers to entry into an industry are high
14. Oligopoly
Characteristics of Oligopoly
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A key feature of an oligopolistic market is that
A
Each firm produces a different product from other firms
B
A single firm chooses a point on the market demand curve
C
Each firm takes the market price as given
D
A small number of firms are acting strategically
Verified step by step guidance1
Understand the definition of an oligopolistic market: An oligopoly is a market structure characterized by a small number of firms whose decisions are interdependent and strategic.
Recognize the strategic behavior in oligopolies: Firms in an oligopoly are aware of each other's actions and may react strategically, such as through price setting, product differentiation, or output decisions.
Identify the incorrect options: In an oligopoly, firms do not produce entirely different products, nor do they take the market price as given. Instead, they often have some control over pricing due to limited competition.
Consider the role of market demand: Unlike a monopoly, no single firm in an oligopoly chooses a point on the market demand curve independently; rather, they must consider the potential reactions of other firms.
Conclude with the correct feature: The defining characteristic of an oligopolistic market is the strategic interaction among a small number of firms, which influences their market behavior and decisions.
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