Why Might Only a Few Firms Dominate an Oligopolistic Industry

question 23

Multiple Choice

Why might only a few firms dominate an oligopolistic industry?

• A)A natural or legal barrier to entry exists.
• B)Perfectly elastic demand makes small-scale operation economically inefficient.
• C)Decreasing returns to scale may make small-scale firms more advantageous.
• D)Inelastic market demand leads to the domination of the industry by a few firms.
• E)It is due to the outcome of the prisoners' dilemma.

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Definitions:

International Trade

The exchange of goods, services, and capital between countries and territories, influencing global economic activity.

Adverse Selection

A situation where sellers have information that buyers do not, or vice versa, leading to transactions that benefit the more informed party.

Death Spiral

A term often used in insurance and pricing strategies to describe a situation where pricing adjustments lead to reduced participation or purchase, necessitating further price increases, and thus accelerating a decline in demand or viability.

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured as a part of a health care system.