Which of the following is the best example of an oligopoly?

• A. Wheat farming
• B. The automobile industry
• C. Local barber shops
• D. National postal service

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definition of an oligopoly. An oligopoly is a market structure characterized by a small number of firms that dominate the market, producing similar or differentiated products, and where each firm's decisions affect the others.
2. Step 2: Analyze each option in terms of market structure characteristics. Wheat farming is typically a perfectly competitive market with many small producers and homogeneous products.
3. Step 3: Local barber shops usually represent monopolistic competition, with many sellers offering differentiated services but no single firm dominating the market.
4. Step 4: The national postal service is often a government monopoly or a regulated monopoly, not an oligopoly, since it is usually the sole or primary provider.
5. Step 5: The automobile industry fits the oligopoly model because it consists of a few large firms that dominate the market, produce differentiated products, and have significant market power influencing prices and output.