A market structure in which there is one large firm that has a major share of the market and many smaller firms supplying the rest of the remainder of the market is called the:

a) Stackelberg model.

b) Kinked demand curve model.

c) Dominant firm model.

d) Cournot model.

e) Bertrand model.

The correct answer is c) Dominant firm model.

In the dominant firm model, there is a single large firm operating in the market along with many small firms. The large firm has all the power in the market. It decides the price and quantity in line with its profit maximization objective. The price is thus set in the market and the remaining number of units can be supplied by the other firms.

The other options are evaluated below.

a) Stackelberg model - the Stackelberg model is generally used for duopolies. Here, we have been specifically told that there are a number of small firms.

b) Kinked demand curve model - this model is seen in oligopolies where firms do not look to engage in price competition as this would ultimately reduce profits of the whole industry.

d) Cournot model - in this model, firms choose quantity simultaneously.

e) Bertrand model - here the competition is based on pricing decisions and not the quantity supplied.