A differentiated-products oligopoly market consists of _________ selling differentiated product that are __________ for each other.
A)two firms; complements
B)fewer than five firms; substitutes
C)a small number of firms; complements
D)a small number of firms; substitutes

Question

Quizplus · Accepted Answer

A differentiated-products oligopoly market consists of a small number of firms selling products that are substitutes for each other, as differentiation of the products makes them similar but not identical. This creates competition among the firms, as consumers may have preferences for one product over another. The other choices are incorrect, as complements refer to products that are often used together, whereas substitutes are products that can be used in place of each other. Furthermore, few means at least three, so choice B is not sufficiently specific. A differentiated-products oligopoly market is characterized by a small number of firms selling products that are substitutes for each other. If the products were complements, there would be a tendency towards cooperation and collusion rather than competition, which is the typical outcome in an oligopoly market. Option A is incorrect because two firms are not enough to qualify as an oligopoly market. Option B is incorrect because there is no specific number of firms that defines an oligopoly market. Option C is incorrect because it is contradictory to the definition of a differentiated-products oligopoly market.

A Differentiated-Products Oligopoly Market Consists of _________ Selling Differentiated Product