In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

A. pure monopoly

B. oligopoly

C. monopolistic competition

D. pure competition

The correct answer is B. oligopoly.

Explanation:

An oligopoly is a market structure where there are few relevant competitors and each of them has some capacity to influence market variables (such as price and amount of balance).

In the oligopoly, competing companies have market power, but at a lower level than in the case of monopoly. Since instead of having only one bidder, there is a small group of companies. This means that although each of the companies has an influence on the market price and quantity (they do not take it as given), the freedom to choose the level of these variables is limited by the existence of other competing companies. A special case of oligopoly is the duopoly, where there are only two bidders in a market.