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Question
Which of the following most closely approximates our definition of oligopoly?
Which of the following most closely approximates our definition of oligopoly?
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Solution
The correct option is B The cigarette industry
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others.
The decisions of one firm influence, and are influenced by, the decisions of other firms. A business that are part of an oligopoly, share some common characteristics: they are less concentrated than in a monopoly but more concentrated than in a competitive system.
This creates a high amount of interdependence which encourages competition in non-price-related areas, like advertising and packaging. The tobacco companies, soft drink companies, and airlines are examples of an imperfect oligopoly.
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others.
The decisions of one firm influence, and are influenced by, the decisions of other firms. A business that are part of an oligopoly, share some common characteristics: they are less concentrated than in a monopoly but more concentrated than in a competitive system.
This creates a high amount of interdependence which encourages competition in non-price-related areas, like advertising and packaging. The tobacco companies, soft drink companies, and airlines are examples of an imperfect oligopoly.
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