The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Which of the following is a characteristic of an oligopoly market?
A)Each firm in an oligopoly market can take independent pricing and output decisions.
B)There are many firms in an oligopoly market hence a firm cannot influence the market price.
C)In an oligopoly market, each firm's pricing and output decisions depend on those of its rivals.
D)Firms in an oligopoly market always manufacture differentiated products.
E)Barriers to entry does not exist in an oligopoly market.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Which of the following is a characteristic of an oligopoly market?
A)Each firm in an oligopoly market can take independent pricing and output decisions. 
B)There are many firms in an oligopoly market hence a firm cannot influence the market price. 
C)In an oligopoly market, each firm's pricing and output decisions depend on those of its rivals. 
D)Firms in an oligopoly market always manufacture differentiated products. 
E)Barriers to entry does not exist in an oligopoly market.

Quizplus · Accepted Answer

In an oligopoly market, firms are interdependent and their pricing and output decisions depend on those of their rivals. This is depicted by the kinked demand curve model, where firms match price cuts but do not match price increases. Therefore, option C is the correct characteristic of an oligopoly market. The other options are not characteristics of an oligopoly market. Option A is a characteristic of a monopolistically competitive market, option B is a characteristic of perfect competition, option D is a characteristic of any market structure that is not perfect competition, and option E is not true as barriers to entry do exist in an oligopoly market.

The Figure Given Below Shows the Revenue and Cost Curves