Question

When Honda experienced declining sales as a result of quality and safety issues, it began offering buyer incentives to new-car buyers. Nearly immediately, Ford and General Motors began similar promotions. These businesses __________.

Answer 1

Answer:

represent an oligopoly in which there are few sellers, and each seller has considerable control over price.

Explanation:

Car manufacturers are an oligopoly because they are relatively companies that operate around the world, they all offer similar products although they are not identical (e.g. sedans, SUVs, pickup trucks, etc.), and they all possess a considerable market power. Also it is very difficult for a new company to enter the market because the barriers of entry are extremely high since each company sells millions of cars per year worth billions of dollars.  Also, when of them starts a promotional activity, the rest will probably follow.