DECA Sports and Entertainment Marketing Practice Exam

In terms of market structure, how would an industry with only two firms be classified?

1. Monopoly

2. Oligopoly

3. Duopoly

4. Monopsony

The correct answer is: Duopoly

An industry with only two firms is classified as a duopoly. This term specifically refers to a market structure where two companies dominate the market, impacting pricing and competition strategies. In a duopoly, the actions of one firm directly influence the decisions of the other, leading to either cooperative or competitive behaviors. This classification is essential because it highlights the unique dynamics present when only two players are involved in a market. For example, in a duopoly, the firms may engage in price wars or work together to set prices jointly, affecting the overall market supply and consumer choice. Other classifications such as monopoly, oligopoly, and monopsony describe different market conditions. A monopoly involves a single firm controlling the entire market, while an oligopoly consists of a few firms but more than two. A monopsony refers to a market with only one buyer, which is not applicable in this context. Understanding that a duopoly specifically refers to two firms clarifies the concept of competitive interactions between a limited number of market players.