Question

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?

1) Monopolistic competition

2) Oligopoly

3) Monopoly

4) Perfect competition

Answer 1

The correct answer is option 2.

Step-by-step explanation:

In a consumer electronics industry, the three largest firms hold close to 85 percent of the industry's market share. These firms are interdependent, and each firm must consider the strategic actions of its competitors.

These characteristics indicate that the industry is an oligopoly market.

In an oligopoly, there are few firms in the market. These firms are interdependent and each firm has to consider the reaction of its rival in making a decision. There is a high degree of competition in the market.

Because of the high degree of competition and interdependence, the price generally remains sticky.