Oligopolistic industries are characterized by :a)a few dominant firms and substantial barriers to entry.b)a few large firms and no entry barriers.c)a large number of small firms and no entry barriers.d)one dominant firm and low entry barriers.Correct answer is option 'A'. Can you explain this answer?

Question

Answer

The term oligopoly indicates: a few firms producing either a differentiated or a homogeneous product. Oligopolistic industries are characterized by: a few dominant firms and substantial entry barriers.

Answer

Well as my previous frnd has explained that oligopoly is a market situation in which there are few firms selling homogeneous or differentiated products.. Nw the basic reason behind few firms is barriers which prevent entry of new firms into the industry... There are many reason for this.. At last only those firms can enter into the industry who are able to cross these barriers...so as there are few firms nd barriers to entry of firms so there is also competition among these few...

Answer

Oligopolistic industries are characterized by a few dominant firms and substantial barriers to entry. This means that there are only a few large firms that dominate the industry, and it is difficult for new firms to enter and compete in the market.

Here is a detailed explanation of why option 'A' is the correct answer:

Dominance of a few firms:
- In an oligopolistic industry, there are only a few large firms that control a significant portion of the market share. These firms have a strong influence on the market dynamics and competition.
- The dominance of these few firms allows them to have a significant impact on pricing strategies, product differentiation, and overall market conditions.
- The actions of one firm in the industry can have a direct impact on the others, leading to strategic interdependence.

Substantial barriers to entry:
- Oligopolistic industries often have substantial barriers to entry, which make it difficult for new firms to enter and compete in the market.
- These barriers can include high startup costs, economies of scale enjoyed by existing firms, strong brand loyalty towards existing firms' products, and legal or regulatory barriers.
- Existing firms in the industry may also engage in strategic actions to deter new entrants, such as aggressive pricing or product innovation.

Impact on competition and market behavior:
- The dominance of a few firms and the barriers to entry create a unique market structure where competition is limited and firms must carefully strategize to maintain their market position.
- Due to the interdependence among the few firms, their pricing decisions and strategic moves can have a significant impact on the market as a whole.
- Firms in oligopolistic industries often engage in non-price competition, such as advertising, product differentiation, and innovation, to gain a competitive edge.

Conclusion:
In summary, oligopolistic industries are characterized by a few dominant firms and substantial barriers to entry. This market structure creates a unique competitive environment where the actions of a few firms have a significant impact on the market dynamics. Understanding these characteristics is crucial for analyzing and predicting the behavior of firms in oligopolistic industries.

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