When Toyota experienced declining sales as a result of quality and safety issues, it began offering buyer incentives to new-car buyers. Nearly immediately, Ford and General Motors began similar promotions. These businesses
A) represent an oligopoly in which there are few sellers, and each seller has considerable control over price.
B) represent a monopoly in which only one firm supplies a product or products.
C) are engaging in monopolistic competition in which there are many buyers as well as a relatively large number of sellers that differentiate their products from those of competitors.
D) are engaging in pure competition, in which no single seller is powerful enough to affect prices.
E) are engaging in monopolistic competition, in which the products are very similar.

Question

Quizplus · Accepted Answer

These businesses represent an oligopoly, a market structure characterized by a small number of firms that have significant market power, which allows them to influence prices through strategic actions such as offering buyer incentives. The immediate response by Ford and General Motors to Toyota's incentives indicates that these companies are closely watching each other's actions, a typical behavior in oligopolistic markets.

When Toyota Experienced Declining Sales as a Result of Quality