Arizona State University (ASU) MGT302 Principles of International Business Exam 3 Practice

When a market is characterized as an oligopoly, it means that a few large firms dominate and control a significant portion of the market. In this structure, these firms have substantial pricing power and can influence market outcomes, such as prices and outputs, because they hold a large market share. The interdependence between these firms means that the actions of one firm can significantly affect the others; for example, if one company raises its prices, others may follow suit to maintain their profitability.

Oligopolistic markets often feature barriers to entry, which prevent new competitors from easily entering the market. This situation can lead to less competition overall, unlike markets that are highly competitive with many small firms — where numerous competitors exist and have little influence over the market price. In contrast to a monopoly, where one firm has total control over the market, an oligopoly consists of several firms that collectively dominate, but there remains a level of competition among them. Additionally, the concept of fixed prices is more characteristic of collusion or market manipulation among the firms rather than being an inherent feature of oligopoly.

Thus, in international business, an oligopoly reflects a significant market concentration that can impact competition, consumer choices, and price levels.