AICPA CPA-Business Exam - Topic 1 Question 117 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 117
Topic #: 1

[All CPA-Business Questions]

An industry that is oligopolistic would be best characterized by:

AOne firm selling a product with no close substitutes.

BSignificant barriers to entry.

CHorizontal or flat demand curves for the output of individual firms.

DThe absence of significant economies of scale.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Oligopoly market conditions are characterized by:

* Few firms in the market

* Significant barriers to entry

* Differentiated products

* Fixed (or semi fixed) prices

* Kinked demand curves

Choice 'a' is incorrect. This is an example of monopoly.

Choice 'c' is incorrect. Horizontal demand curves represent demand that is perfectly price elastic (buyers will only pay one price for any quantity of a product). This occurs in perfectly competitive markets.

Choice 'd' is incorrect. This is characteristic of perfect competition, as there are no barriers to entry ('size doesn't matter') in perfect competition.

by Brice at Oct 16, 2025, 04:42 AM

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Fletcher

27 days ago

Overall, B is solid. It captures the essence of oligopolistic markets.

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Remona

2 months ago

I feel like D is wrong. Economies of scale often exist in these markets.

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Leota

2 months ago

But C is interesting. Demand curves can be flat in oligopolies.

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Glennis

2 months ago

A seems right too. One firm dominating fits oligopoly.

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Gianna

2 months ago

I agree, B makes sense. Hard to enter means less competition.

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Apolonia

2 months ago

I think B is the best choice. Barriers to entry define oligopolies.

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Carissa

2 months ago

Totally agree with B, barriers are huge in these markets!

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Dierdre

3 months ago

Wait, D? That seems off for oligopolies.

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Mable

3 months ago

C makes sense, but I’m not sure about that one.

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Moon

3 months ago

I think A is also relevant, but not the main point.

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Leonida

3 months ago

I'll go with B. Gotta love those high barriers to entry - keeps the riff-raff out of my industry!

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Charlene

3 months ago

Haha, I bet the answer is B. Oligopolies are all about keeping the competition out, am I right?

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Alecia

3 months ago

Hmm, I'm not sure. D could work too - the lack of economies of scale can contribute to an oligopolistic market structure.

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Kallie

4 months ago

C seems like the best option to me. Horizontal demand curves for individual firms is a classic sign of an oligopoly.

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Katie

4 months ago

B is definitely a key feature of oligopolies.

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Florinda

4 months ago

I think B is the correct answer. Significant barriers to entry are a key characteristic of an oligopolistic industry.

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Rocco

4 months ago

Easy peasy! An oligopoly is characterized by high barriers to entry (B) and firms facing horizontal/flat demand curves (C). The other options don't really fit the definition of an oligopolistic market. I feel good about this one.

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Annabelle

5 months ago

I'm a bit confused on this one. Is an oligopoly the same as a monopoly? I know they both involve limited competition, but I'm not sure I fully understand the distinctions. Guess I'll have to think it through carefully.

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Dudley

5 months ago

Okay, I've got this. An oligopoly is defined by a small number of large firms that dominate the market. So B and C are the right answers - high barriers to entry and flat demand curves for individual firms in that type of market structure.

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Arlene

5 months ago

Hmm, this is a tricky one. I'm not totally sure about the differences between oligopolistic and monopolistic markets. I'll need to review my notes on market structures before attempting this.

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Vivan

5 months ago

I think the key here is to identify the characteristics of an oligopolistic market. B and C seem like the most relevant options, with high barriers to entry and flat demand curves for individual firms.

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