CFA Level I · CFA Level I Exam · The Firm and Market Structures
Compared with a monopolistically competitive market, an oligopoly is most likely characterized by:
An oligopoly is most likely characterized by pricing decisions that depend on rivals' likely responses. A few large firms with high barriers to entry are interdependent. Many sellers and free entry that erodes long-run economic profit describe monopolistic competition instead.
- Aa larger number of independent sellers
- Bpricing decisions that depend on rivals' likely responsesCorrect
- Cfree entry that eliminates economic profit in the long run
Explanation
In an oligopoly few firms are interdependent, so each firm's pricing and output choices consider rivals' reactions. Many independent sellers and free entry eliminating long-run economic profit describe monopolistic competition.
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