Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is a primary characteristic of an oligopoly?

1. A single producer dominates

2. Few competitors remain

3. Complete market control

4. No barriers to entry

The correct answer is: Few competitors remain

A primary characteristic of an oligopoly is the presence of few competitors in the market. In an oligopoly, a limited number of firms have significant market power, and their actions can directly impact the market and each other. Because there are only a small number of firms, they often have to consider the reactions of their competitors when making decisions about pricing, production levels, and marketing strategies. This situation can lead to a degree of market control, as the firms work within a small group rather than facing numerous competitors, enabling them to set prices and output levels that would not be feasible in a perfectly competitive market. The interdependence among the few firms can also foster collusion, where firms might agree, either explicitly or implicitly, to avoid competitive practices that could lead to price wars. In contrast, the other options do not accurately describe an oligopoly. A single producer dominating the market describes a monopoly rather than an oligopoly, and complete market control is more characteristic of monopolistic scenarios. Additionally, an oligopoly often exists due to significant barriers to entry, which may prevent new competitors from entering the market easily, as opposed to a situation with no barriers to entry.