ACCA Applied Knowledge · Business and Technology · Competitive factors
A small number of large airlines dominate a route. Each sets fares knowing that rivals will react to any price cut, so fares tend to stay stable. Which market structure does this describe?
This describes an oligopoly: a few large firms whose decisions are interdependent, so each anticipates rivals' reactions and prices tend to be stable. A monopoly has one seller and perfect competition has many small firms with no pricing power.
- AOligopolyCorrect
- BPerfect competition
- CMonopoly
Explanation
Few large firms that are interdependent and watch each other's pricing is the hallmark of an oligopoly. Perfect competition has many price takers, and a monopoly has only one seller.
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