When does a dominant position in a market typically arise?

A dominant position in a market typically arises when a business can act independently of competitive pressures. This situation often results from the company holding a significant market share, which allows it to influence prices and output levels without needing to respond directly to competitors' actions.

When a business operates in such a manner, it may set its prices at a level that maximizes profit, potentially leading to reduced competition and a less dynamic market. This characteristic of being able to operate independently from the competitive forces establishes a dominant position, as the company does not need to consider rivals’ pricing or output decisions when making strategic choices.

In contrast, the other options do not fully capture the essence of what constitutes a dominant market position. While being the only seller can indicate a monopoly, it is not the only way to attain dominance. Additionally, price-setting agreements among multiple businesses suggest collusion rather than a dominant position derived from competitive independence. Finally, having the lowest production costs may contribute to a competitive advantage but does not inherently imply dominance in the market unless it allows the firm to influence the overall market dynamics independently.