CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market
A market has exactly two sellers of a product, and each seller must consider the likely reaction of the other before fixing its price or output. Which market form does this describe?
The market form is duopoly. It has exactly two sellers who are interdependent, so each must weigh the other's likely response when deciding price or output. Monopsony involves a single buyer, while perfect and monopolistic competition have many sellers.
- ADuopolyCorrect
- BMonopsony
- CPerfect competition
- DMonopolistic competition
Explanation
A market with only two sellers is a duopoly, a special case of oligopoly. Because there are just two firms, each one's decision affects the other, so they are interdependent. Monopsony concerns a single buyer, not two sellers, and perfect competition has many sellers.
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