Which of the following best describes an oligopoly?

• A. A market structure where firms have no influence over market price and are price takers.
• B. A market structure with a single firm that controls the entire market.
• C. A market structure with a few large firms that dominate the industry and may engage in strategic behavior.
• D. A market structure with many small firms selling identical products.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the key market structures in microeconomics: perfect competition, monopoly, oligopoly, and monopolistic competition.
2. Step 2: Recall that in perfect competition, firms are price takers with no influence over market price, and there are many small firms selling identical products.
3. Step 3: Recognize that a monopoly consists of a single firm controlling the entire market, with significant market power to set prices.
4. Step 4: Identify that an oligopoly is characterized by a few large firms dominating the industry, where each firm's decisions can affect the others, leading to strategic behavior.
5. Step 5: Compare the given options to these definitions and select the one that matches the characteristics of an oligopoly: a market structure with a few large firms that dominate the industry and may engage in strategic behavior.