Economics Oligopoly Questions
The main difference between an oligopoly and a monopolistic competition lies in the number of firms and the level of product differentiation within the market.
In an oligopoly, there are only a few large firms that dominate the market. These firms have significant market power and can influence prices and output levels. They often engage in strategic behavior, such as collusion or price-fixing, to maximize their profits. Examples of oligopolistic industries include the automobile, airline, and telecommunications industries.
On the other hand, monopolistic competition is characterized by a large number of small firms that produce slightly differentiated products. Each firm has a limited degree of market power, as consumers have a variety of substitutes to choose from. Firms in monopolistic competition compete on factors such as product quality, branding, and marketing. Examples of monopolistically competitive industries include restaurants, clothing stores, and hair salons.
In summary, the key differences between an oligopoly and a monopolistic competition are the number of firms and the level of product differentiation. Oligopolies have a small number of dominant firms with significant market power, while monopolistic competition consists of many small firms with limited market power and slightly differentiated products.