Question

An oligopolistic market structure is distinguished by several characteristics, one of which is either similar or identical products. Which of the following are other characteristics of this market structure? Check all that apply.
A) Market control by many small firmsB) Difficult entryC) Mutual interdependenceD) Market control by a few large firmsE) Mutual dependence

Answer 1

Answer: Option B and C

         

Explanation: In simple words, oligopoly refers to the market structure in which there are few firms operating at a huge level and selling products that are close but not absolute substitutes of each other.

     The high level of investment and too much of legal formalities makes it difficult to entry in such industries. Firms in such industries produce identical goods thus they do not compete in the amaretto with respect to price.

the firms operate their market on the basis of non price factors such as advertisements but still are mutually interdependent on each other as a minor decrease in price of other can deregulate the demand in the whole industry. Automobile sector is one the primary examples of oligopoly.