Which of the Following is the Correct Oligopoly Definition?

Which of the Following is the Correct Oligopoly Definition? 

A) There are many sellers offering identical products.
B) A single seller dominates the entire market.
C) A few firms dominate the market, and their actions affect each other.
D) Firms have no control over pricing due to perfect competition.

Correct Answer: C) A few firms dominate the market, and their actions affect each other.

Explanation: An oligopoly is a market structure in which a small number of firms dominate the market. These firms are said to be interdependent, meaning that one firm’s decisions affect the other firms. This leads to strategic behaviour by the firms.

Oligopoly markets are characterised by high entry barriers, meaning that it is difficult for a firm to enter the market. The firms may also indulge in collusive practices to reduce competition and maintain high prices.

In an oligopoly market, as opposed to a perfectly competitive market, prices are not changed frequently. This leads to price rigidity. The firms may compete on non-price factors such as advertising and differentiation.

Examples of oligopoly markets are the telecommunications industry, the airline industry, and the automobile industry.

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