Question

Pick one monopolistically competitive industry and one oligopolistic industry. Compare and contrast the two industries with respect to the key attributes of market structure. Remember that the lines between market structures can be a bit blurry so not everyone is likely to agree.

Answer 1

AN example of a monopolistically competitive firm is McDonalds in the fast food industry and an example of oligopoly is Boeing in the airline industry. Both the forms of market structure are a part of imperfect competition and some of the differences based on the key attributes are as follows:

1. Considering the entire industry in which these firms operate, it has been found out that there are large number of firms in monopolistically competitive industry structure while there exists only a few firms in oligopoly. Thus, dominance of the firm is more in oligopoly as compared to monopolistically competitive firm.

2. In case of airline industry, there are significant number of entry and exit barriers for the new and existing firms in the industry. On the other hand, there exists free entry and exit in monopolistically competitive market.

3. The firms generally make normal profits in monopolistically competitive industry in the long run because of free entry and ecit of firm. On the other hand, Boeing in the airline industry has reported making positive profits even in the long run.