The oligopoly market structure is characterized by several defining qualities, one of which is either similar or identical products. Of the following list of characteristics, which others describe the oligopolistic market structure? Check all that apply.
Market control by many small firms
Neither mutual interdependence nor mutual dependence
Mutual interdependence
Difficult entry
Market control by a few large firms
None
The correct answer and explanation is :
The correct characteristics of an oligopolistic market structure from the given list are:
✅ Mutual interdependence
✅ Difficult entry
✅ Market control by a few large firms
Explanation (300 Words)
An oligopoly is a market structure where a few large firms dominate an industry. These firms have significant control over market prices and output, but they are also interdependent, meaning their decisions impact one another.
1. Market Control by a Few Large Firms
Unlike perfect competition, where many small firms compete, an oligopoly consists of a small number of dominant firms. Each firm holds a substantial share of the market, limiting competition. Examples include the automobile, airline, and smartphone industries.
2. Mutual Interdependence
Oligopolistic firms do not operate in isolation. Instead, they consider how their competitors will respond to changes in price, output, or marketing strategies. For example, if one airline reduces ticket prices, others may follow to remain competitive. This interdependence often leads to price rigidity or the use of non-price competition, such as advertising and product differentiation.
3. Difficult Entry
High barriers to entry characterize oligopolies. These barriers can be financial (high startup costs), legal (patents, regulations), or strategic (brand loyalty, economies of scale). Because of these obstacles, it is difficult for new firms to enter and compete with the established players.
Why the Other Options Are Incorrect
❌ Market Control by Many Small Firms – This describes perfect competition, not an oligopoly.
❌ Neither Mutual Interdependence nor Mutual Dependence – Oligopolies exhibit mutual interdependence, as firms must consider their rivals’ actions.
Thus, an oligopoly is best defined by a few large firms controlling the market, mutual interdependence, and difficult entry.