____ refers to a market structure in which a few powerful companies dominate the market and react to the strategic and tactical moves of the others.

A) Perfect competition

B) Monopolistic competition

C) Monopoly

D) Oligopoly

E) Monopsony

Answer is D. Oligopoly

• The first characteristic of oligopoly is that there are a large number of buyers.
• The second feature is that the firms behave strategically. The number of firms are few and therefore each firm has a significant share in the market.Each firm recognizes that every time it takes an action, it will provoke a response from other firms.These actions, in turn will affect the original firm. Each firm therefore recognizes that it is interdependent with other firms in the industry
• For example, when a particular airline announces a cut in fares, it knows that its action will have an effect on the firm specific demand curves of other airlines. It also knows that the other firms would retaliate by reducing the fares, and therefore, whatever gain it expects from the price cut would be a very short lived one.So, firms need to keep a watch on what other firms are up to and, if possible predict their actions.