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

• A. A few large firms dominate the market
• B. Products are always perfectly differentiated
• C. There are no barriers to entry or exit
• D. Firms are price takers with no market power

Answer: (A)

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 significant market power, meaning they can influence prices rather than being price takers.
3. Recognize that products in an oligopoly can be either differentiated or homogeneous, so products are not always perfectly differentiated.
4. Note that there are typically high barriers to entry in an oligopoly, which prevent new firms from easily entering or exiting the market.
5. Conclude that the key characteristic of an oligopoly is 'a few large firms dominate the market,' distinguishing it from perfect competition or monopoly.