Certified Professional Contract Manager (CPCM) 2025 – 400 Free Practice Questions to Pass the Exam

An oligopoly is characterized by a market structure where a small number of firms have significant market power, which enables them to influence prices and output levels. This is reflected in the definition provided by the correct answer, which highlights the presence of a few companies in the market, often competing with slightly differentiated products.

In an oligopoly, these firms are interdependent; the actions of one firm, such as changing prices or introducing new products, can significantly impact the other firms in the market. This interdependence often leads to strategic planning among the companies, where they might engage in price-fixing or collusion to maintain their market positions.

The characteristics of slight product differences are essential in an oligopoly because they help firms differentiate themselves from competitors while still competing within the same market space. This differentiation can attract specific consumer segments and allows for a degree of pricing power while maintaining competition.

The other contexts present in the other options do not align with the definition of an oligopoly. For instance, many companies with identical products would suggest a perfectly competitive market instead. A market with only one company dominating it describes a monopoly, while a situation where numerous companies are competing purely on price suggests a competitive market rather than an oligopoly. In essence, the nuanced competition