Multiple Choice
Which of the following is a common way that government intervention can affect oligopolies?
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14. Oligopoly
Characteristics of Oligopoly
Multiple Choice
Which of the following firms is most likely to be considered an oligopolist?
A
A company that produces smartphones in a market dominated by a few large firms
B
A local water utility that is the sole provider in the area
C
A farmer selling wheat in a perfectly competitive market
D
A small bakery operating in a town with many other bakeries
Verified step by step guidance1
Step 1: Understand the definition of an oligopoly. An oligopoly is a market structure characterized by a small number of large firms that dominate the market, often producing similar or differentiated products, and where each firm's decisions affect the others.
Step 2: Analyze each option based on the number of firms and market characteristics. For example, a local water utility that is the sole provider represents a monopoly, not an oligopoly.
Step 3: Recognize that a farmer selling wheat in a perfectly competitive market faces many sellers with identical products, so this is perfect competition, not oligopoly.
Step 4: Note that a small bakery in a town with many other bakeries operates in a market with many competitors, which is closer to monopolistic competition rather than oligopoly.
Step 5: Identify that a company producing smartphones in a market dominated by a few large firms fits the oligopoly definition, as the market has few dominant players influencing prices and output.
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