What is the primary characteristic of an oligopoly?

The primary characteristic of an oligopoly is indeed the presence of a small number of businesses supplying a certain product. In an oligopolistic market, the actions of one firm directly influence the others, leading to interdependence among the businesses. This market structure is often characterized by limited competition where a few firms dominate the market share, and as a result, these firms have the ability to set prices and output levels, which differentiates it from other market structures like perfect competition or monopoly.

In addition, the small number of firms in an oligopoly can lead to strategic behaviors, like collusion, where companies may work together to set prices or outputs, benefiting the firms but potentially harming consumers through higher prices and reduced choices. This interdependent behavior is essential in understanding how oligopolies operate, unlike in a monopolistic market, where a single entity controls all supply, or in a competitive market with many players producing identical products, where individual actions have little impact on the market as a whole.