How are oligopoly and monopolistic competition alike? How are they different?

Expert Solution

Oligopoly and monopolistic competition are alike in a manner that while oligopoly consists of a less number of sellers and monopolistic competition comprises many sellers, they both demonstrate an imperfect competition. Another similarity between both oligopoly and monopolistic competition is their extent of control over the prices.

While being a bit alike, these two market structures hold some major differences:

- The commodities and services are distinctly more differentiated in the monopolistic competition as compared to the oligopoly market.

- Another difference is barriers to enter the market. While the new firms to enter the oligopoly competition experience a high entry barrier, the monopolistic competition has lesser entry barriers because it provides some sort of freedom to the firms for both entry and exit.

- Coming to the level of domination, in the oligopoly competitive structure, a very few huge entities dominate the market while a lot of smaller entities dominate the market of monopolistic competition.

Rahul Sunny answered 1 year ago

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