Question

Why is the automobile industry considered an oligopoly? Select all that apply.

It offers little differentiation within the market.
It has significant barriers to entry.
It is controlled by companies that patent key technology.
It relies on price variation to attract customers.
It depends on brand loyalty and image to generate sales.
It is dominated by a few key players.

Answer 1

Correct choices:
- It has significant barriers to entry. — true: high capital costs, extensive supply chains, regulations, dealer networks and scale economies make entry difficult.
- It is controlled by companies that patent key technology. — true: incumbent automakers (and suppliers) hold important patents (powertrains, safety, EV and autonomous tech), which protect advantages and raise barriers.
- It depends on brand loyalty and image to generate sales. — true: marketing, reputation, and perceived quality/style strongly influence buyer choice.
- It is dominated by a few key players. — true: a small number of large firms account for most global production and market power.

Not correct:
- It offers little differentiation within the market. — false: there is meaningful product and brand differentiation.
- It relies on price variation to attract customers. — false: firms often compete by features, design, financing, and branding rather than by large price cuts.