US CMA Part 2 · Chapter 6 · Question 17 of 22
Which market structure is characterized by a few large, interdependent sellers whose pricing decisions provoke reactions from competitors, often illustrated by a kinked demand curve?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Oligopoly
Explanation
In an oligopoly a few firms dominate and each firm's pricing affects its rivals. The kinked demand curve model suggests rivals match price cuts but not price increases, which makes prices relatively rigid. Perfect competition has many price-takers, monopolistic competition has many sellers of differentiated products, and a monopoly has a single seller.
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