Why number of firms is limited in an oligopoly market? Explain.

1.	Why number of firms is limited in an oligopoly market? Explain.
Answer» In an oligopoly market, certain ‘barriers to entry’ prevent new firms to enter the industry. Such barriers maybe: i. Requirement of large capital ii. Patents and copyrights iii. Government Licences iv. Control over important raw material These barriers may prevent a new firm to enter the oligopolistic market. Firms which are able to cross these barriers are able to enter the industry.

Answer»

In an oligopoly market, certain ‘barriers to entry’ prevent new firms to enter the industry. Such barriers maybe:

i. Requirement of large capital

ii. Patents and copyrights

iii. Government Licences

iv. Control over important raw material

These barriers may prevent a new firm to enter the oligopolistic market. Firms which are able to cross these barriers are able to enter the industry.

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Why number of firms is limited in an oligopoly market? Explain.

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