Oligopoly is characterized by which of the following?Multiple select question.There are a few sellersEach firm is affected by the decision of its rivalsPrice and output are determined by the market There is a standardized or differentiated product
Question
Oligopoly is characterized by which of the following?Multiple select question.There are a few sellersEach firm is affected by the decision of its rivalsPrice and output are determined by the market There is a standardized or differentiated product
Solution
Oligopoly is characterized by:
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There are a few sellers: This is true. In an oligopoly, there are only a few firms that make up the majority of the industry.
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Each firm is affected by the decision of its rivals: This is also true. In an oligopoly, each firm's decisions directly affect the other firms in the market.
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Price and output are determined by the market: This is not entirely true. While market forces do play a role, firms in an oligopoly have significant control over price and output. They often engage in strategic pricing and output decisions to maximize their profits.
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There is a standardized or differentiated product: This can be true. Products in an oligopoly can be either standardized (homogeneous) or differentiated. For example, in the oil industry (an oligopoly), the product is standardized. In the smartphone industry (also an oligopoly), products are differentiated.
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