Pure competition: very large number of firms; standardized
products; no control over price: price takers; no obstacles to
entry; no nonprice competition.
Pure monopoly: one firm; unique product: with no close substitutes;
much control over price: price maker; entry is blocked; mostly
public relations advertising.
Monopolistic competition: many firms; differentiated products; some
control over price in a narrow range; relatively easy entry; much
nonprice competition: advertising, trademarks, brand names.
Oligopoly: few firms; standardized or differentiated products;
control over price circumscribed by mutual interdependence: much
collusion; many obstacles to entry; much nonprice competition,
particularly product differentiation.
- Hometown supermarket: oligopoly. Supermarkets are few in number
in any one area; their size makes new entry very difficult; there
is much nonprice competition. However, there is much price
competition as they compete for market share, and there seems to be
no collusion. In this regard, the supermarket acts more like a
monopolistic competitor. Note that this answer may vary by area.
Some areas could be characterized by monopolistic competition while
isolated small towns may have a monopoly situation.
- Steel industry: oligopoly within the domestic production
market. Firms are few in number; their products are standardized to
some extent; their size makes new entry very difficult; there is
much nonprice competition; there is little, if any, price
competition; while there may be no collusion, there does seem to be
much price leadership.
- Kansas wheat farm: pure competition. There are a great number
of similar farms; the product is standardized; there is no control
over price; there is no nonprice competition. However, entry is
difficult because of the cost of acquiring land from a present
proprietor. Of course, government programs to assist agriculture
complicate the purity of this example.
- Commercial bank: monopolistic competition. There are many
similar banks; the services are differentiated as much as the bank
can make them appear to be; there is control over price (mostly
interest charged or offered) within a narrow range; entry is
relatively easy (maybe too easy!); there is much advertising. Once
again, not every bank may fit this model—smaller towns may have an
oligopoly or monopoly situation.
- Automobile industry: oligopoly. There are the Big Three
automakers, so they are few in number; their products are
differentiated; their size makes new entry very difficult; there is
much nonprice competition; there is little true price competition;
while there does not appear to be any collusion, there has been
much price leadership. However, imports have made the industry more
competitive in the past two decades, which has substantially
reduced the market power of the U.S. automakers.