Final answer:
The pharmaceutical industry can be defined as an oligopoly due to patents protection, government regulation, and high start-up production cost. Large number of customers, however, is not a characteristic of an oligopoly.
Step-by-step explanation:
An oligopoly is a market structure characterized by a small number of large firms dominating the industry. The reasons the pharmaceutical industry can be defined as an oligopoly include:
(a) Patents protection of products: When the government grants patents to pharmaceutical companies for their drugs, it creates a barrier to entry, allowing these firms to maintain market power and prevent competition.
(b) Regulated by the government: The pharmaceutical industry is heavily regulated by the government to ensure safety and efficacy. This regulation can create barriers to entry, making it difficult for new firms to enter the market.
(d) High start-up production cost: Developing and producing pharmaceutical drugs requires significant capital investment. This high start-up production cost acts as a barrier to entry, limiting the number of companies that can compete in the industry.
On the other hand, (c) Large number of customers is not a characteristic of an oligopoly. Oligopolies are typically characterized by a small number of firms and limited competition rather than a large number of customers.
The pharmaceutical industry can be characterized as an oligopoly due to patent protection, regulatory barriers, and high start-up costs, but not due to the number of customers.
The industry of pharmaceuticals can indeed be defined as an oligopoly for several reasons. First, patent protection of products is a typical feature of oligopolies, as it can limit competition and sustain high prices, creating significant barriers to entry for other firms. Second, being regulated by the government can contribute to setting an oligopoly structure due to regulation potentially limiting the number of competitors in the market. Third, high start-up production costs discourage new entrants and maintain the market's control by a few large firms.
On the other hand, having a large number of customers is not a defining characteristic of an oligopoly. It could indicate a large market, but the oligopoly is more about the number and size of producers rather than the size of the customer base.