Amarket structure in which a small number of firms compete and natural or legal barriers prevent the entry of new firms is called a. an oligopoly b. monopolistic competition c. a monopoly

A

Explanation:

An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market. For example, major airlines like British Airways (BA) and Air France operate their routes with only a few close competitors, but there are also many small airlines catering for the holidaymaker or offering specialist services. Similarly, while the 'Big Six' energy suppliers dominate the UK market, with a combined market share of 78% for electricity supply (according to the energy regulator, Ofcom), there are currently 54 active suppliers.

Oligopolies and monopolies frequently maintain their position of dominance in a market might because it is too costly or difficult for potential rivals to enter the market. These hurdles are called barriers to entry and the incumbent can erect them deliberately, or they can exploit natural barriers that exist.

Another key feature of oligopolistic markets is that firms may attempt to collude, rather than compete. If colluding, participants act like a monopoly and can enjoy the benefits of higher profits over the long term. The oligopolies are common in the airline industry, banking, brewing, soft-drinks, supermarkets and music. For example, the manufacture, distribution and publication of music products in the UK, as in the EU and USA, is highly concentrated, with a 3-firm concentration ratio of around 70%, and is usually identified as an oligopoly.

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