CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market
Which feature most clearly distinguishes an oligopoly from other forms of market?
The defining feature of oligopoly is that a few firms dominate the market and their decisions are interdependent. Each firm must anticipate rivals' reactions when fixing price or output, unlike perfect competition with many sellers or monopoly with a single seller.
- AA very large number of sellers each selling identical goods
- BA single seller with no close substitutes
- CA few firms whose decisions are interdependentCorrect
- DFree entry and exit with no barriers
Explanation
In oligopoly there are few sellers, so each firm must consider rivals' reactions to its price and output decisions. Many sellers with identical goods describes perfect competition, and a single seller describes monopoly. Free entry is not a feature of oligopoly because barriers exist.
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