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Which of the following is a distinguishing feature of oligopoly?
- a)Free entry and exit
- b)Homogeneous products with no barriers
- c)Interdependence among firms
- d)One seller controlling the market
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Which of the following is a distinguishing feature of oligopoly?a)Free...
Understanding Oligopoly
Oligopoly is a market structure characterized by a small number of firms that dominate the market. The distinguishing feature of oligopoly is interdependence among firms. Here’s why this is a key characteristic:
Interdependence Among Firms
- In an oligopoly, the actions of one firm significantly influence the actions of others.
- This means that firms must consider the potential reactions of their competitors when making decisions about pricing, output, and marketing strategies.
- For example, if one firm lowers its prices, others may follow suit to remain competitive, leading to a price war.
Why Other Options Do Not Apply
- Free Entry and Exit (a): This is characteristic of perfect competition, not oligopoly. Oligopolistic markets often have high barriers to entry, limiting new competitors.
- Homogeneous Products with No Barriers (b): While some oligopolies may sell homogeneous products (like steel), others offer differentiated products (like automobiles). Barriers are usually significant in oligopoly, distinguishing it from perfect competition.
- One Seller Controlling the Market (d): This describes a monopoly rather than an oligopoly, where a single firm holds substantial market power.
Conclusion
In summary, the essence of oligopoly lies in the significant interdependence of firms, making it crucial for them to strategize based on the actions of their competitors. This dynamic differentiates oligopoly from other market structures, shaping the competitive landscape and influencing market outcomes.
Oligopoly is a market structure characterized by a small number of firms that dominate the market. The distinguishing feature of oligopoly is interdependence among firms. Here’s why this is a key characteristic:
Interdependence Among Firms
- In an oligopoly, the actions of one firm significantly influence the actions of others.
- This means that firms must consider the potential reactions of their competitors when making decisions about pricing, output, and marketing strategies.
- For example, if one firm lowers its prices, others may follow suit to remain competitive, leading to a price war.
Why Other Options Do Not Apply
- Free Entry and Exit (a): This is characteristic of perfect competition, not oligopoly. Oligopolistic markets often have high barriers to entry, limiting new competitors.
- Homogeneous Products with No Barriers (b): While some oligopolies may sell homogeneous products (like steel), others offer differentiated products (like automobiles). Barriers are usually significant in oligopoly, distinguishing it from perfect competition.
- One Seller Controlling the Market (d): This describes a monopoly rather than an oligopoly, where a single firm holds substantial market power.
Conclusion
In summary, the essence of oligopoly lies in the significant interdependence of firms, making it crucial for them to strategize based on the actions of their competitors. This dynamic differentiates oligopoly from other market structures, shaping the competitive landscape and influencing market outcomes.
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Which of the following is a distinguishing feature of oligopoly?a)Free...
In oligopoly, a few large firms dominate the market. Each firm’s pricing and output decision depends on the expected reaction of rival firms, making interdependence the key feature. Unlike perfect competition or monopoly, strategies such as price rigidity and collusion are common in oligopolies.
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Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer?.
Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is a distinguishing feature of oligopoly?a)Free entry and exitb)Homogeneous products with no barriersc)Interdependence among firmsd)One seller controlling the marketCorrect answer is option 'C'. Can you explain this answer?.
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