Which of the following examples illustrates an oligopoly market?

• A. The automobile industry, where a few large firms dominate the market
• B. A local farmers' market with many small sellers
• C. The wheat market with thousands of producers
• D. A single utility company providing electricity to a city

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the definition of an oligopoly market. An oligopoly is a market structure characterized by a small number of large firms that dominate the market, often leading to limited competition and interdependent decision-making.
2. Step 2: Analyze each example to see if it fits the oligopoly criteria. For instance, the automobile industry typically has a few large firms controlling most of the market share, which aligns with the oligopoly definition.
3. Step 3: Evaluate the other options: a local farmers' market with many small sellers represents perfect competition, the wheat market with thousands of producers also represents perfect competition, and a single utility company is a monopoly.
4. Step 4: Conclude that the example illustrating an oligopoly is the automobile industry, where a few large firms dominate the market.
5. Step 5: Remember that identifying market structures involves looking at the number of firms, the nature of competition, and market control.