Which term best describes a few firms controlling a market and setting prices due to limited competition?

The term that best describes a few firms controlling a market and setting prices due to limited competition is oligopoly. In an oligopoly, a small number of firms have significant market power, which allows them to influence prices and output levels. These firms are interdependent, meaning the actions of one firm can directly impact the others, often leading to strategies where firms might collude to set prices or output levels to maximize their profits.

In contrast, monopolistic competition involves many firms competing with differentiated products, which means they have some control over prices but still face competition from other sellers. A cartel is an arrangement among competing firms to coordinate their actions, notably in pricing, but it is not a market structure itself like an oligopoly; rather, it describes the behavior of firms within an oligopoly. Finally, a duopoly is a specific case of an oligopoly with only two firms in the market, which is more limited than the general condition of an oligopoly that involves multiple firms. Thus, oligopoly accurately captures the scenario of a few firms dominating a market.