Question
Why is competition limited in an oligopoly?
High entry costs prevent new producers from entering the market.
Producers completely refuse to engage in price wars.
No major distinctions exist between producers.
Producers actively segment the market to avoid competition.
High entry costs prevent new producers from entering the market.
Producers completely refuse to engage in price wars.
No major distinctions exist between producers.
Producers actively segment the market to avoid competition.
Answers
GPT-4o mini
In an oligopoly, competition is often limited due to several reasons, but the most relevant explanation from the options provided is:
**High entry costs prevent new producers from entering the market.**
This means that significant barriers to entry, such as high startup costs, economies of scale, or regulatory challenges, discourage or prevent new companies from entering the market and competing with established firms. This helps maintain the market power of the existing firms, thereby limiting competition.
While the other options may have some relevance in specific contexts, high entry costs are a primary reason for the limited competition characteristic of an oligopolistic market structure.
**High entry costs prevent new producers from entering the market.**
This means that significant barriers to entry, such as high startup costs, economies of scale, or regulatory challenges, discourage or prevent new companies from entering the market and competing with established firms. This helps maintain the market power of the existing firms, thereby limiting competition.
While the other options may have some relevance in specific contexts, high entry costs are a primary reason for the limited competition characteristic of an oligopolistic market structure.