Which of the following best describes oligopoly?

The correct choice captures the essence of an oligopoly, which is characterized by a market structure where a limited number of firms dominate the market. In an oligopoly, these few sellers often provide products that are similar but slightly differentiated, leading to competition among them based on factors such as price, quality, and marketing strategies. This differentiation allows each firm to hold some degree of market power, affecting how they respond to the actions of their competitors.

Oligopolies are distinct from other market structures. For instance, a market with a single seller is known as a monopoly, while a market with many identical products typically describes perfect competition. Additionally, a market with one buyer represents a monopsony, which differs from an oligopoly by focusing on buyer power rather than seller concentration. Understanding these distinctions helps clarify why oligopoly specifically refers to a few sellers in a market setting.