Question

Give an outline of the differentiating characteristics of a monopolistic competition and an oligopoly market structure.

Answer 1

In an oligopoly, few companies produce the same product and in a monopolistic competition some companies produce similar products, but each one of them produces a slightly different product.

Let's imagine a market in which there are only 2 producers of chocolate- that is an oligopoly (it would not be one if there were 30) .

Now, let's imagine that one of them only produces dark chocolate, and the other only milk chocolate - now, that's a monopolistic competition!

Answer 2

Both Monopoly and Oligopoly have large market shares. Unlike monopoly where only one business holds 100% of the market, oligopoly is composed of a few businesses that have market shares. Each movement or decision made by any companies in an oligopoly will greatly affect the market.

Monopoly = 100% market share, has a say on supply and price of goods or services offered.

Oligopoly = 2 or 3 companies share the market. Each have at least 33% of the market. Any change made by one business will affect the other remaining businesses.