Jack, jamie, ronnie, and stephan own the only computer software manufacturing companies in the country. when jack increases the price of his product and advertises extensively to promote it, the other three manufacturers immediately increase their prices and launch promotional strategies. what type of market structure do these four companies operate in? a. oligopoly b. monopolistic competition c. monopoly d. perfect competition e. natural monopoly

The correct answer is A.

An oligopoly is a market structure, governed by imperfect competition mechanisms, and constituted by an small number of producers. Each holds market power and therefore, can exercise certain influence over the price of the good. Companies that form a monopoly can either decide to reach agreements (cartel) or to compete. The scenario described in the questions refers to an oligopoly at which firms compete with each other.

In such situation, there is a total dependence on the competitors, and the strategy of each producer has to be determined taking account what the competitors have done or are expected to do. This is why when one of the producers, the leader, implements a certain policy, the rest quickly follow him in order to make sure that he does not gain part of their market share.

Oligopoly

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