Question

 Characteristics of oligopoly 

An oligopolistic market structure is distinguished by several characteristics, one of which is market control by a few large firms. Which of the following are other characteristics of this market structure? Check all that apply. 

• Difficult entry 

• Mutual interdependence 

• Either similar or identical products 

• Neither mutual interdependence nor mutual dependence 

• No entry 

Answer 1

Market control by a few large firms

Difficult entry

Mutual interdependence

Explaination-

Under oligopoly, there are few large firms. Each firm produces a significant portion of total output. Hence each large firms has market control.

The main reason for few firms is the barriers which prevents entry of new firms into the industry. Patents, requirement of large capital, control over crucial raw materials, etc, are some of the reasons, which makes it difficult for new firms to enter the industry.

Firms under oligopoly are mutually interdependent. Interdependence means that action of one firm affect the action of other firms. A firm considers the action and reaction of the rival firms while determining it's price and output levels.