Final answer:
Oligopolies are markets with few large firms that are interdependent, often leading to strategic behavior where firms must consider competition and collusion influencing pricing and output decisions.
Step-by-step explanation:
Oligopolistic markets are characterized by a small number of large firms dominating the industry, creating a state of mutual interdependence. These firms strategically make decisions about output, pricing, and advertising, taking into account the potential reactions and decisions of their competitors. When oligopolistic firms compete aggressively, they may behave like perfect competitors, leading to lower costs and possibly zero profits. Conversely, if they collude, they can act similarly to a monopoly, pushing prices up and securing high profits. The strategic behavior in oligopolies involves a delicate balance between the benefits of competition and the advantages of collusion.