Multiple Choice
Under which market structure is it generally easier for a new firm to enter the market, and why?
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14. Oligopoly
Characteristics of Oligopoly
Multiple Choice
Because oligopoly markets have only a few sellers, the actions of any one seller:
A
have no impact on the market price or output
B
lead to perfectly competitive outcomes
C
can significantly affect the profits and strategies of other sellers in the market
D
are ignored by consumers due to lack of competition
Verified step by step guidance1
Understand the nature of an oligopoly market: it is characterized by having only a few sellers, which means each seller's decisions can influence the market.
Recall that in an oligopoly, because there are few sellers, the actions of one seller (such as changing prices or output) can affect the market price and the behavior of other sellers.
Recognize that this interdependence means sellers must consider the potential reactions of their competitors when making decisions, which impacts their profits and strategies.
Contrast this with perfectly competitive markets, where individual sellers are price takers and their actions do not affect the market price.
Conclude that the correct understanding is that in oligopoly markets, the actions of any one seller can significantly affect the profits and strategies of other sellers in the market.
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