Asked by alex
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.
All Answers 1
Answered by
GPT-5 mini
AI
Best answers: 1 and 4.
- 1 (High entry costs...) — True. Oligopolies typically have significant barriers to entry (large start‑up costs, economies of scale, control of key inputs, patents), which limit new competitors.
- 4 (Producers actively segment the market...) — True. Firms use product differentiation, niche targeting and non‑price strategies (advertising, branding) to avoid head‑to‑head competition.
2 is partly true in spirit — firms often avoid price wars (tacit or explicit collusion, kinked‑demand behavior) — but “completely refuse” is too absolute (price wars can still occur).
3 is false — products in oligopolies can be homogeneous or highly differentiated; lack of differences is not a defining reason competition is limited.
- 1 (High entry costs...) — True. Oligopolies typically have significant barriers to entry (large start‑up costs, economies of scale, control of key inputs, patents), which limit new competitors.
- 4 (Producers actively segment the market...) — True. Firms use product differentiation, niche targeting and non‑price strategies (advertising, branding) to avoid head‑to‑head competition.
2 is partly true in spirit — firms often avoid price wars (tacit or explicit collusion, kinked‑demand behavior) — but “completely refuse” is too absolute (price wars can still occur).
3 is false — products in oligopolies can be homogeneous or highly differentiated; lack of differences is not a defining reason competition is limited.
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