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Answer :
An oligopoly is a market structure characterized by a small number of large firms that dominate the market and have significant influence over price and other market outcomes. These firms often produce similar but slightly differentiated products.
Of the options given, the automotive industry is a classic example of an oligopoly. This is because:
Limited Number of Companies: In the automotive industry, there are only a few major players, such as Ford, Toyota, Volkswagen, and Honda. These companies dominate global market share.
Barriers to Entry: Entering the automotive industry requires significant capital investment, access to extensive supply chains, and technological expertise, which limits the number of competitors.
Product Differentiation: Although automotive companies produce cars, they differentiate their offerings through brand image, technological features, design, and performance.
Interdependence: Companies in an oligopoly are highly interdependent, meaning the actions of one firm, such as setting prices or launching new models, can greatly affect the others, often leading to strategic planning and competitive tactics.
Price Rigidity: Prices in oligopolistic markets, like the automotive industry, tend to remain relatively stable due to the understanding (often implicit) among firms not to engage in price wars.
Thus, option 2. The automotive industry accurately represents an oligopoly.
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