Which of the following is a characteristic of an oligopoly market structure?

• A. There is free entry and exit in the market
• B. A few large firms dominate the market
• C. Firms are price takers with no control over market price
• D. Products are always perfectly differentiated

Answer: (B)

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.
2. Recall that in an oligopoly, firms have some control over the market price because they are not price takers; their decisions affect the market.
3. Recognize that free entry and exit is more typical of perfect competition, not oligopoly, where barriers to entry often exist.
4. Note that products in an oligopoly can be either differentiated or homogeneous, so 'always perfectly differentiated' is not a defining characteristic.
5. Conclude that the key characteristic of an oligopoly is that a few large firms dominate the market, which influences market outcomes.