Question

Which of the following statements is true?

I. Oligopoly is a form of imperfect competition.
II. Oligopoly firms produce only differentiated products.
III. Unlike perfectly competitive markets, oligopoly markets have only a small number of firms in oligopoly markets
a) I only
b) II and III
c) I and III
d) I, II, and III

Answer 1

The correct answer is option c.

Step-by-step explanation:

An oligopoly market is a form of imperfect competition where there are a few firms. These firms can produce identical or differentiated products. Because of a few firms in the market, there is a high degree of competition in the market.

These firms are interdependent such that the economic decisions of a firm affect its rivals. So each firm has to consider the reaction of its rivals before making decisions.

The firms are price makers and face a downward-sloping demand curve.