Question

5 reasons as to why monopolistic competition exists and 5 reasons as to why oligopolistic competition exists

Answer 1

The five most common reasons for the existence of monopolistic competition are :-

(i). There are no significant barriers to entry, therefore markets are relatively contestable.

(ii). There are many producers and many consumers in the market, and no business has total control over the market price.

(iii). Demand is highly inelastic due to the presence of large number of substitutes.

(iv). Absence of economic profits helps in keeping the price down in long run.

(v). Greater freedom of entry.

The five most common reason for the existence of oligopolistic competition are :-

(i). Products are either differentiated or standardized. & a more consumer choice from product differentiation.

(ii). Customer Loyalty exists in the market to some degree.

(iii). Non-Price Competition & a great variety to consumers.

(iv). Price stability helps in planning & to reduce uncertainty.

(v). Product improvement results in greater market share.

So, these are some common & important reasons for the existence of Monopolistic & Oligopolistic Competition.