According to the video, which market structure category is the car market best described as?

Question

BlackTom AI · Accepted Answer

Let's evaluate what each market structure implies for the car market as described in the video.

Option a: Monopoly. A monopoly means a single seller dominates the entire market with no close substitutes. In the car industry, there are usually many manufacturers (Toyota, Ford, Hyundai, etc.) and a wide array of models and brands. Therefore, the car market is not a single seller with market power to set prices unilaterally. This makes a monopoly an unlikely description.

Option b: Perfect competition. Perfect competition would feature many sellers, identical products, free entry and exit, and price-taking behavior. In reality, cars are highly differentiated by brand, features, quality, and design, and firms have some influence over pricing. The presence of product differentiation and brand loyalty means the market does not meet the criteria for perfect competition.

Option c: Monopolistic competition. This structure involves many firms selling differentiated products, each with some market power due to differentiation. The car industry does resemble this to a large extent: numerous brands and models with varying features and perceived differences, leading to some pricing power for each firm. However, the market may still exhibit stronger interfirm interactions and scale effects than a textbook monopolistic competition.

Option d: Oligopoly. An oligopoly is characterized by a few large firms that dominate the market and whose decisions (pricing, output, new models) are interdependent. The car market typically fits this description best, as a handful of major automakers control a large share of sales globally, and competitive moves by one company often influence the others.

MUF0061 Economics Unit 1 - Semester 2, 2025 Video and Quiz: Introduction to Market Structures (10 - 15 minutes)

According to the video, which market structure category is the car market best described as?

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