An oligopoly is a market that is characterized by which of the following features?

• A. A small number of large firms that dominate the market
• B. A single firm that controls the entire market
• C. Firms that are price takers and cannot influence market price
• D. Many firms selling identical products with no barriers to entry

Answer: (A)

Verified step by step guidance

1. Understand the definition of an oligopoly: It is a market structure characterized by a few firms that have significant market power.
2. Recall that in an oligopoly, the number of firms is small, and each firm is large enough to influence market outcomes, unlike perfect competition where firms are price takers.
3. Recognize that an oligopoly differs from a monopoly, which has only one firm controlling the entire market.
4. Note that in perfect competition, there are many firms selling identical products with no barriers to entry, which is not the case in an oligopoly.
5. Conclude that the key feature of an oligopoly is a small number of large firms dominating the market, which allows them to influence prices and market conditions.