Question

In relation to the number of firms, which scenario best exemplifies an oligopoly?

A. A single firm producing 95% of the output.
B. Eight to ten firms producing 60% to 70% of the output.
C. Two to four firms producing 70% to 80% of the output.
D. Ten or more firms producing 90% of the output.

Answer 1

The scenario best exemplifying an oligopoly is when two to four firms produce 70% to 80% of the market's output, which aligns with the definition of an oligopoly as a market dominated by a few firms with significant market power.

Step-by-step explanation:

An oligopoly is a market structure characterized by a small number of firms that dominate the market, often accounting for 70-80% of the output. In the scenario Two to four firms producing 70% to 80% of the output, we observe conditions closely aligned with the definition of an oligopoly. This is because we have a small number of firms that possess a large market share, sufficient enough to influence market prices and outcomes.