Which of the following is not a characteristic of oligopoly? A

Marketing Jan 12, 2021

Which of the following is not a characteristic of oligopoly?

A. P = MC

B. Few firms

C. Strong barriers to entry

D. Price-maker

E. P > MR

Expert Solution

The correct answer is: A. P = MC

A. P = MC. Oligopolistic firms behave like monopolistic firms. Thus, they do not set their price equal to the marginal cost (like perfectly competitive firms).
B. Few firms. An oligopoly market has a few firms in the market. Thus, this is a characteristic of an oligopolistic market.
C. Strong barriers to entry. Just like in a monopoly market, there are strong barriers to entry into an oligopolistic market.
D. Price-maker. Oligopolistic firms have monopoly power and thus, they are price makers.
E. P > MR. Since oligopolistic firms have some market power, they set their price above their marginal revenue.

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