Question

oligopoly
which situation could be the best example of an oligopoly?
○ a new producer of power tools has entered the market and is relying on low prices to attract consumers.
○ a new producer of a smart phone operating system is trying to enter the market but cannot because most cell phone makers use one of two popular operating systems.
○ a new producer of running shoes is trying to enter the market but cannot because of an existing patent.
○ a new producer of tires has entered the market and found that demand is already being met.

Explanation:

To determine the best example of an oligopoly, we recall that an oligopoly is a market structure with a few large firms dominating the market, and new entrants face significant barriers.

• Option 1: A new power tool producer using low prices suggests a competitive market (maybe monopolistic competition), not oligopoly.
• Option 2: Most cell phone makers use one of two operating systems. This means there are a few (two) dominant firms, and new entrants face barriers (can’t enter easily). This fits oligopoly (a few firms controlling the market).
• Option 3: A patent barrier suggests a monopoly (due to patent protection), not oligopoly.
• Option 4: Demand being met doesn’t indicate a few dominant firms; it could be a competitive or monopolistic market.

So the situation with the smartphone operating system (two popular systems, new entrant blocked) is the best oligopoly example.

Answer:

B. A new producer of a smart phone operating system is trying to enter the market but cannot because most cell phone makers use one of two popular operating systems.