Question

Why is the number of firms small in oligopoly ? Explain.

Answer 1

Oligopoly refers to the form of market where a very few big firms (giants) own major control over the whole market by producing significant portion of the market demand. The number of firms is small in oligopoly there is more competition which makes it very difficult for any new firm to enter the industry.

Moreover as the existing firms are the only giants in the market, new entry into the market is associated with high costs, which further narrows the scope for a new entrant.