Final answer:
An oligopoly in the American oil market, exemplified by the dominance of firms like Exxon/Mobil and Shell, refers to a market structure where a few companies control most of the market share.
Step-by-step explanation:
When Exxon/Mobil and Shell along with a few other companies dominate the American oil market, this is an example of an oligopoly. An oligopoly is a market structure in which a few firms control the majority of the market share. This can lead to economies of scale which could benefit consumers through potentially lower prices due to reduced costs, but it may also reduce competition which can be detrimental to consumer choice and price control.
In the American oil market, the existence of a few dominating firms like Exxon/Mobil and Shell suggests that these firms can operate with significant control over prices, influence over politics, and the ability to adjust to competitive pressures in a manner that smaller entities cannot. The historical context of the oil industry illustrates this point, with the breakup of Standard Oil due to its monopolistic practices leading to the creation of companies that still exist today, including Exxon and Mobil. Furthermore, antitrust laws such as the Clayton Antitrust Act and the Federal Trade Commission continue to play a role in trying to ensure fair competition in U.S. markets.
However, economic globalization is constantly changing the dynamics of market competition, with firms now not only vying with domestic competition but with international players as well. This has been evident in various industries including the automotive sector where U.S. firms like General Motors, Ford, and Chrysler have seen their market dominance challenged by foreign manufacturers. Regardless of the industry, the tension between economies of scale and the benefits of competition remain a critical point in discussions about market structures like oligopolies.