Question

An oligopoly is a market that is characterized by?

1) One firm that totally dominates the supply of the product.
2) A large number of small firms all producing very similar products.
3) A few large sellers who dominate the market.
4) Several small firms that compete primarily by differentiating their products.

Answer 1

An oligopoly is a market structure characterized by a few large sellers who dominate the market. These sellers have significant market power and can control a large portion of the product output.

Step-by-step explanation:

An oligopoly is a market structure characterized by a few large sellers who dominate the market. These sellers have significant market power and control a large portion of the product output. Oligopolies can exist in various industries and often involve differentiated products. When firms in an oligopoly collude, they use restrictive trade practices to lower output and raise prices, similar to a monopoly.

However, collusion is illegal, so oligopolistic firms may also compete with each other. An oligopoly is a market structure characterized by a few large firms that dominate the market. These firms hold significant market power, usually controlling 70–80% of the product output, which creates high barriers to entry for smaller competitors. Oligopolistic firms often make differentiated products, such as automobiles, computers, and soft drinks. In an oligopoly, the actions of one firm, such as changes in price or output, can significantly affect the other firms within the industry. These firms may attempt to collude, acting similarly to a monopoly by lowering output and increasing prices to maximize profits, although such collusion is often unstable and illegal

Answer 2

An oligopoly is a market structure with few dominant firms with significant market power, often featuring product differentiation and high barriers to entry. Decisions within an oligopoly are interdependent, and despite the temptation, explicit collusion is illegal.

Step-by-step explanation:

An oligopoly is a market structure characterized by a small number of firms that control a large portion of the market share. In an oligopoly, these firms have significant market power and face high barriers to entry, which often prevents smaller competitors from entering the market.

While it is not required, oligopolies can benefit from product differentiation, which allows them to maintain a competitive edge and resist competition. The defining feature of an oligopoly is the interdependence among the firms; when one firm makes a decision regarding price or output, it directly impacts the other firms in the market. These firms may be tempted to collude and act like a monopolist by limiting output and raising prices to maximize profits, although such explicit collusion is illegal and can be unstable due to the incentive for individual firms to cheat on the agreement.