In the framework of an oligopoly, which of the following is a key characteristic that distinguishes it from other market structures?

• A. There is only one seller dominating the market.
• B. Firms produce identical products and act as price takers.
• C. There are no barriers to entry for new firms.
• D. Firms are interdependent in their decision-making.

Answer: (D)

Verified step by step guidance

1. Understand the definition of an oligopoly: it is a market structure characterized by a few firms that dominate the market.
2. Recognize that in an oligopoly, firms are interdependent, meaning each firm's decisions (such as pricing and output) affect and are affected by the decisions of other firms.
3. Compare this to other market structures: for example, a monopoly has only one seller, perfect competition has many firms acting as price takers with identical products, and monopolistic competition has low barriers to entry.
4. Identify that the key distinguishing feature of an oligopoly is this interdependence among firms, which leads to strategic behavior and often results in firms considering rivals' potential reactions when making decisions.
5. Conclude that the correct characteristic that sets oligopoly apart is that firms are interdependent in their decision-making.