ACCA Certification Practice Test 2026 – All-in-One Guide to Secure Your Chartered Success!

In a duopoly, the primary characteristic is the presence of two firms that significantly influence and dominate a particular market. This structure creates a competitive landscape where the decisions of one firm directly affect the other, leading to strategic interactions that can shape pricing, output, and other market factors. The actions of these two firms are crucial because they must consider their rival's potential responses, which adds a layer of complexity to their decision-making processes.

In contrast, a market with no competition would indicate a monopoly rather than a duopoly. A market characterized by many firms offering varying products describes perfect competition or monopolistic competition, where the influence of any single firm is minimal. Lastly, one firm controlling the entire market pertains to monopoly conditions, where the market power is concentrated in the hands of a single entity. Thus, the defining feature of a duopoly is indeed the dominance of two firms in the market, making the choice that highlights this aspect the most accurate representation.