Chapter 9, Problem 16AA

To determine

To state: The difference between oligopoly and Monopolistic Competition.

Answer to Problem 16AA

Oligopoly refers to the market where there exists lesser number of sellers and thus all of them exercise a significant influence in the market. Monopolistic competition is a market structure that contains both the aspects of oligopoly and perfect competitive markets.

Explanation of Solution

Oligopoly refers to the market in which there exists lesser number of firms selling same or differentiated products whereas monopolistic competition refers to the market where there are large number of sellers somewhat differentiated products or their close substitutes.

The entry and exit of firm in oligopoly is difficult because there exists lesser number of firms whereas it is easy in case of monopolistic competition as there are many sellers in the market.

Often a times, geographical area also differentiates between oligopoly and monopolistic competition i.e. when market lies in a small geographical zone, it is an oligopoly and when a market has its presence in large city, then it is a monopolistic competition.

Economics Concept Introduction

Introduction: Oligopoly is a situation where there exists lesser number of sellers of a product or service whereas in monopolistic there are many sellers. Monopolistic competition refers to the market in which there exists only large number of sellers.