Final answer:
An oligopoly is a market structure characterized by few large firms that are interdependent and face high barriers to entry.
Step-by-step explanation:
An oligopoly is a market structure characterized by very few producers supplying similar products with high barriers to entry. There are three main characteristics of an oligopoly:
- Few large firms: An oligopoly consists of a small number of large firms that dominate the market. These firms have significant market power and control a large share of the market.
- Interdependence: The actions and decisions of one firm in an oligopoly directly affect the other firms. For example, if one firm changes its price or level of output, it will have a direct impact on the other firms' decisions.
- Barriers to entry: Oligopolies have high barriers to entry, which make it difficult for new firms to enter the market. These barriers can include high startup costs, economies of scale, and patents or licenses.