Difference Between Oligopoly And Monopolistic Competition Pdf

difference between oligopoly and monopolistic competition pdf

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Monopoly vs. Oligopoly: What's the Difference?

Economists can predict and describe the nature of a firm based upon its existing size, structure, behaviour and relationship to other firms market power. This is known as theory of the firm.

Two possible market structures that a firm may belong to are perfect competition and monopolistic competition there are also oligopolies and monopolies. Perfect competition exists when an industry consists of an infinite amount in reality a very large number of firms. There are a number of assumptions that accompany a perfectly competitive market:. In real life, the closest industry to representing perfect competition is the agricultural market.

Monopolistic competition exists if an industry has a fairly large number of firms present albeit, fewer firms than in perfect competition. The assumptions that underlie a market in monopolistic competition are:. There exist a number of real life examples of markets in monopolistic competition, for example: nail salons, restaurants, car mechanics, etc. There are additionally similarities and differences in the profit abilities and efficiency of each market type:.

In both perfect competition and monopolistic competition, firms in the industry are profit maximisers. A firm is only able to make normal zero economic profits in the long run, but can make short-run abnormal profits or losses. In perfect competition, a firm achieves both allocative and productive efficiency in the long run. Consumers pay lower prices than in monopolistic competition, as they are only able to purchase homogenous products. In monopolistic competition, a firm never achieves allocative or productive efficiency as consumers are willing to pay a slightly higher price in order to have differentiated products choice.

Study resources Family guide University advice. Log in Sign up. Find a tutor How it works Prices Resources. Sign up. There are a number of assumptions that accompany a perfectly competitive market: 1 Each individual firm has no market power - Firms are too small, relative to the whole industry, to have a noticeable effect on the output of the whole industry by altering its own output.

Prices, costs, quality of products, availability, etc. The assumptions that underlie a market in monopolistic competition are: 1 The firm has some price-setting ability - Firms are still relatively small compared to the industry, so actions of one firm are unlikely to have a great effect on its competitors.

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Oligopoly vs Monopoly

In a market, one can find various forms of imperfect market competition for several services and products. Oligopoly vs Monopoly are 2 of them, wherein monopoly can be a view for those products and services which will not have any kind of competition, while on the flip side oligopoly can be observed for the products and services with stiffer competition. Monopoly: Services offered for Transport, Water, Electricity, and so on are practical examples of the monopoly. A monopoly is a type of market condition wherein the only single seller is selling an entire product, which is 3. Oligopoly: Industries like an automobile, cold drink, telecommunication, etc. Oligopoly is a kind of market competition, whereby there are a lessor few numbers of sellers or vendors in the marketplace who are selling differential or nearly differential products. In an oligopoly, as stated there are only a few firms or sellers who are operating in the marketplace and so, the sellers or the firms are influenced by the activities of other firms or the sellers.

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But what if there was a substantial price difference between the two? In that case, buyers could be persuaded to switch from one to the other. Thus, if Coke has a.


What are the differences/similarities between perfect competition and monopolistic competition?

The definition of market structure is different for both marketers and economists. However, economists look at the bigger picture, and so, they are always in pursuit of evaluating wider trends so as to understand the factors that motivate consumers to know how this information will impact a large segment of the population. Therefore, according to them, the market structure is basically a manner in which markets are organized on the basis of a number of firms in the industry. There are four types of market structure, including monopoly, perfect competition, monopolistic competition and oligopoly. Monopoly, as the name suggests, just has a single firm.

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Economists have identified four types of competition— perfect competition , monopolistic competition , oligopoly , and monopoly. In monopolistic competition , we still have many sellers as we had under perfect competition. Instead, they sell differentiated products—products that differ somewhat, or are perceived to differ, even though they serve a similar purpose. Products can be differentiated in a number of ways, including quality, style, convenience, location, and brand name.

Economists can predict and describe the nature of a firm based upon its existing size, structure, behaviour and relationship to other firms market power. This is known as theory of the firm.

Difference Between Oligopoly and Monopolistic Competition

ECONOMIC COST: Another term for opportunity cost the highest valued alternative foregone in the pursuit of an activity that is used in the study of economics to indicate the fundamental role opportunity cost plays in economics. The value expressed in terms of satisfaction of the foregone activity is your opportunity cost. Because there are usually several alternatives that aren't pursued, opportunity cost is the highest-valued one.

Oligopolies do not compete on prices. Price wars tend to lead to lower profits, leaving a little change to market shares. However, Oligopolies firms tend to charge reasonably premium prices but they compete through advertising and other promotional means. Existing companies are safe from new companies entering the market because barriers to entry to the market are high. In a monopoly the average revenue curve slopes downward, and the demand curve is very inelastic. Both monopolies and perfect competitions want to maximize profits, although monopolistic prices are usually higher. A pure monopoly is rare like a perfectly competitive market, but there are elements of monopolies in some markets.

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Oligopolies and monopolistic competition

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Oligopoly vs Monopoly

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