Final answer:
Oligopolies are characterized by firms taking into account their competitors' reactions when making output decisions, which is a result of high barriers to entry and the dominance of a few large firms in the marketplace.
Step-by-step explanation:
The distinguishing feature of oligopolies is that firms take account of the reactions of their competitors to their output decisions. Oligopolies are market structures dominated by a small number of large firms, such as the commercial aircraft and soft drink industries, with examples like Boeing, Airbus, Coca-Cola, and Pepsi. High barriers to entry characterize these markets, leading to strategic decision-making regarding output, pricing, and other business considerations, which often depend on the actions of competitors.
Firms within an oligopoly are interdependent and face the temptation to either collaborate, mimicking a monopoly to increase profits by reducing output and raising prices, or to compete, which could lead to outcomes similar to perfect competition with minimal profits. Oligopolies can exhibit characteristics of both monopolies and perfect competition based on the choices made by firms in response to their competitors' actions.