Which product category is the best example of an oligopoly?

• A. Fast food restaurants
• B. Handmade jewelry
• C. Wheat
• D. Automobiles

Answer: (D)

Verified step by step guidance

1. Understand the definition of an oligopoly: it is a market structure characterized by a small number of large firms that dominate the market, producing similar or differentiated products, and where each firm's decisions affect the others.
2. Analyze each product category in terms of market structure characteristics:
3. Fast food restaurants: many competitors, relatively easy entry, so this is closer to monopolistic competition.
4. Handmade jewelry: many small producers, highly differentiated products, and low barriers to entry, resembling perfect competition or monopolistic competition.
5. Wheat: a homogeneous product with many producers and easy entry, typical of perfect competition.
6. Automobiles: dominated by a few large firms, significant barriers to entry, and products that are differentiated but compete closely, fitting the oligopoly market structure.