What best describes an oligopoly?

An oligopoly is characterized by a market structure where a small number of suppliers or firms have significant control over the market, influencing pricing and production decisions. In this scenario, the actions of one supplier directly affect the others. This interdependence in decision-making concerning pricing and market strategy is a key feature of oligopolistic markets.

For example, if one supplier decreases its prices, the others may feel compelled to do the same in order to remain competitive. This leads to a market environment where companies need to consider the potential reactions of their rivals before adjusting their own prices or supply levels. Therefore, the concept of interdependence is central to understanding an oligopoly, which makes it distinct from other market structures.

The other options do not accurately capture the dynamics of an oligopoly. A market dominated by a single supplier describes a monopoly, while numerous suppliers with no price influence indicates a perfectly competitive market. Lastly, suppliers setting prices independently without regard to competitors depict a more fragmented market scenario, which does not align with the characteristics of an oligopoly.