An oligopoly occurs when ...

An oligopoly occurs when ...

• A. A few companies control the entire industry
• B. A single company controls the entire industry
• C. No competition exists
• D. Government controls pricing

Answer: (A)

Oligopoly describes a market in which a small number of firms dominate and control most of the industry, so each company’s pricing and production choices affect the others. That interdependence is the hallmark: with only a few players, decisions aren’t made in isolation because rivals watch and react to what each firm does. High barriers to entry often keep new competitors out, helping the existing firms maintain influence over the market. This fits best with the idea that a few companies control the majority of the industry. A single company would be a monopoly, where one firm has full control. Saying there’s no competition goes beyond an oligopoly, since the existing firms still compete with one another. Government pricing control describes regulation rather than the market structure itself.

Oligopoly describes a market in which a small number of firms dominate and control most of the industry, so each company’s pricing and production choices affect the others. That interdependence is the hallmark: with only a few players, decisions aren’t made in isolation because rivals watch and react to what each firm does. High barriers to entry often keep new competitors out, helping the existing firms maintain influence over the market.

This fits best with the idea that a few companies control the majority of the industry. A single company would be a monopoly, where one firm has full control. Saying there’s no competition goes beyond an oligopoly, since the existing firms still compete with one another. Government pricing control describes regulation rather than the market structure itself.