Praxis II Citizenship

Category - Economics

What type of restrictive business condition is demonstrated by the following scenario:
Companies W, X, Y, and Z are all major corporations that sell flying cars. W, X, Y, and Z agree to set their flying car prices a certain range between two price points so that they make it difficult for other companies to enter the flying car market.
  1. Oligopoly.
  2. Monopoly.
  3. Duopoly.
  4. Panopoly.
Explanation
Answer: A - The scenario demonstrates an oligopoly, in which a group of producers restrict the market for a particular good or service. An oligopoly is essentially the same thing as a monopoly or duopoly; they differ in regard to the number of parties involved (a monopoly consists of competition-restricting acts committed by one party; a duopoly consists of two parties). A real world example would be the accused oligopoly-Apple, Simon & Schuster, Hachette, Penguin, Macmillan, and HarperCollins-that was sued by the U.S. Justice Department in early 2012 for price-fixing in the e-book market.
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