Question

Kellogg’s, which controls 32 percent of the breakfast cereal market, cut the prices of some of its best-selling brands of cereal to regain market share lost to Post, which controls 20 percent of the market. General Mills has 24 percent of the market. The price cuts were expected to trigger a price war.

Based on this information, what market structure best characterizes the market for breakfast cereal?

A. Perfect competition
B. Monopolistic competition
C. Oligopoly
D. Monopoly.

Answer 1

C. Oligopoly

Step-by-step explanation:

An oligopoly is a market structure where a small number of players have control of the market and no firm can keep its competitors from having significant influence over the market. In this case, since three firms have a significant share of the market and a change in price for one company triggers a reaction from the competitors, this market can be classified as an oligopoly.