Question

Oligopoly differs from monopolistic competition in that oligopoly?

1) the firms are not mutually interdependent with regard to price.
2) has many firms, whereas monopolistic competition has few firms.
3) the firms have relatively easy entry.
4) has few firms, whereas monopolistic competition has more firms.

Answer 1

Oligopoly is characterized by a market dominated by a small number of firms with significant market control, whereas monopolistic competition features many firms selling similar but not identical products.

Step-by-step explanation:

Oligopoly differs from monopolistic competition primarily in the number of firms and the nature of market dominance. An oligopoly is a market structure with only a small number of firms that control the market, often characterized by high barriers to entry. These firms have considerable control over their prices and are strategically interdependent, as the decision of one firm can significantly impact others.

Examples include the commercial aircraft industry dominated by Boeing and Airbus, and the U.S. soft drink market controlled by Coca-Cola and Pepsi. On the other hand, monopolistic competition involves many firms that sell differentiated products, which are similar but not identical. Firms in monopolistic competition have some degree of market power but are not able to dominate the market to the extent of oligopolists because of the large number of competitors and the ease of entry into the market.