Question

Why Is the Number of Firms Limited in an Oligopoly Market? Explain.

Answer 1

In an oligopoly market, the firms that function need to invest a large amount of capital to survive. Also, there is fluctuation in the risk and profitability of the firms as any changes in the policy and pricing by one firm can impact all the other firms involved.

Due to these reasons, only a very limited number of firms are involved in an oligopoly market.