Final answer:
An oligopoly is a market structure characterized by a few large firms that dominate the market. These firms have significant market power and often produce differentiated products. Oligopolies are defined by the interdependence of firms within the industry, meaning that when one firm changes its price or output, it directly affects the other firms.
Step-by-step explanation:
An oligopoly is a market structure characterized by a few large firms that dominate the market. These firms have significant market power and often produce differentiated products. Oligopolies are defined by the interdependence of firms within the industry, meaning that when one firm changes its price or output, it directly affects the other firms.
One way to identify an oligopoly in a highly concentrated market is by looking at the market share of the top firms. If a few firms control a large percentage of the market, it indicates the presence of an oligopoly. For example, if four firms control 80% of the market, it suggests an oligopoly.
Oligopolies can exist in various industries, such as automobiles, computers, and soft drinks. They often engage in strategic decision-making, including collusion or competition, to maintain their market power and profits.