Question

There are two producers of wagon wheels that together are the exclusive providers to a large community. The executives of these companies meet to set minimum prices and production levels, thereby ensuring that they each will make a higher profit than they would in a free market. This is an example of a(n) ___________.

Answer 1

Answer: Oligopoly

Explanation: In simple words, oligopoly refers to a market structure in which the market is dominated by small number of large buyers. The activities of one firm in such a market affects the other participants as well. Automobile industry is one of the many examples of oligopoly.

In the given case, the two producers are willing to share the market individually so that they can enjoy better amount of profits. Also they are arranging to set prices as per each others opinions so that no one looses.

Hence from the above we can conclude that the given case illustrates oligopoly.