Paper 2 · June 2019 · Market Structures
Which feature of a market made up of a few large supermarket chains is the clearest evidence that it is an oligopoly?
Aevery firm sells an identical product at a price that is set entirely by the market
Bone single firm supplies the whole market and there are no close substitutes for it
Cthere are thousands of small sellers, none of whom can influence the ruling market price
Deach chain has to weigh how its rivals will react before it changes its own prices
Explanation
Interdependence is the defining feature of oligopoly. Because a handful of firms hold most of the market, one chain's price cut is felt directly by the others, so every pricing decision is taken with the rivals' likely response in mind. Many small sellers describes perfect competition and a single supplier describes monopoly.
Derived from ZIMSEC Economics 6073/2 Paper 2, June 2019, Q1