Question 22

Oligopoly best describes a market structure of limited competition where the market is shared by a small number of sellers.

Oligopoly is characterized by a few firms dominating the market, which can lead to interdependent pricing and market strategies among the sellers.

A) Monopoly

Monopoly refers to a market structure where a single seller controls the entire market without any competition. This does not align with the description of limited competition shared by a small number of sellers, making this option incorrect.

B) Monopolistic competition

Monopolistic competition involves many sellers offering differentiated products, which leads to competition but does not fit the definition of a small number of sellers sharing the market. Therefore, this option is not the best descriptor for the specified market structure.

C) Oligopoly

Oligopoly accurately describes a market structure characterized by a small number of sellers who share the market, leading to limited competition. This term encapsulates the essence of the question, making it the correct choice.

D) Perfect competition

Perfect competition describes a market structure with many sellers offering identical products, resulting in no individual seller having market power. This structure stands in contrast to the limited competition described in the question, rendering this option incorrect.

Conclusion

Oligopoly is the most appropriate term for a market structure with limited competition and a small number of sellers. In contrast, monopoly, monopolistic competition, and perfect competition do not accurately reflect the characteristics outlined in the question, as they involve either single-seller dominance or numerous sellers. Thus, oligopoly distinctly captures the dynamics of the described market structure.