While there is no specific number of firms that must dominate an industry before it is an oligopoly, the number of sellers characterizes an oligopoly when
A) there are more firms than a monopolistically competitive market.
B) there is a sufficient number of firms to satisfy the market demand.
C) the firms are so large relative to the total market that they can affect the market price.
D) the firms are so small relative to the total market that they cannot affect the market price.

Question

Quizplus · Accepted Answer

An oligopoly is characterized by a small number of large firms that have the ability to affect the market price. Option A is incorrect because monopolistically competitive markets can have a large number of firms. Option B is incorrect because the number of firms alone does not determine whether it is an oligopoly. Option D is incorrect because if the firms were too small to affect the market price, it would be a perfectly competitive market.

While There Is No Specific Number of Firms That Must