To determine if a market is an oligopoly,we need to determine if
A) the market's HHI is less than 900.
B) there are many firms in the market.
C) the firms are so few that they recognize their mutual interdependencies.
D) the firms make identical or differentiated products.
E) cartels are legal in their market.

Question

Quizplus · Accepted Answer

An oligopoly market is characterized by a small number of firms, wherein each firm has a significant impact on the market. In such a market, firms recognize their mutual interdependencies and their actions significantly influence the pricing and profits of other firms in the market. Hence, option C is the correct choice. Option A is incorrect because the Herfindahl-Hirschman Index (HHI) is used to measure market concentration, and an oligopoly market can have a high or low HHI. Option B is incorrect because an oligopoly market may have a small number of firms. Option D is incorrect because oligopoly firms may produce either identical or differentiated products. Option E is incorrect because cartels, which are illegal in most countries, are a way that firms collude and is not an essential characteristic for an oligopoly market.

To Determine If a Market Is an Oligopoly,we Need to Determine