Question

3. What is the difference between oligopoly and monopoly?

Answer 1

Answer - The monopoly is the market where only firms present in the market. There is no close substitute good of what monopolist produces. Monopoly firm is a price maker because it has full control over market supply. A monopoly firms earns positive economic profit. Monopolist can determine either price of good or quantity in the market. It can determine both simultaneously. Entry and exit is close form new firms.

In the oligopoly market few firms are present there. 'Few' firms mean, every firm have important role in market supply. If these firms produce homogeneous goods then it is called ''pure oligopoly''. If firms produces differentiated product then it is called 'differentiated oligopoly'. In the oligopoly market we found interdependence in the decisions of oligopoly firms. These firms show group behavior from a common cause. Role of advertising and marketing activities are very important in this market. Demand curves are undetermined in this market.