CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market
Which feature is a defining characteristic of a duopoly rather than of a monopsony?
The defining feature of a duopoly is that there are only two sellers whose price and output decisions are mutually dependent. A single powerful buyer characterises monopsony, while many sellers or free entry point to competitive market forms.
- ATwo sellers whose decisions are mutually dependentCorrect
- BA single buyer with power over the price paid
- CMany sellers offering differentiated products
- DFree entry and exit of many firms
Explanation
Duopoly is defined by two sellers who are interdependent in their price and output decisions. A single buyer with price-setting power defines monopsony, so that option is wrong. Many sellers with differentiated products indicates monopolistic competition, and free entry of many firms is perfect competition.
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