Question

List an example of at least one firm/industry for oligopoly and one firm/industry for monopolistic competition that has not already been covered in the textbook or power points.

Explain the following for each market structure example (please use complete sentences):
1. Why do you think each firm would be operating in that market structure? Justify your answer.
2. Would the different firms have market power or would they be price takers?
3. How is market structure determined?
4. How much product differentiation would each firm/industry use to market their product?
5. In which market structure would firms experience the lowest overall profits? the highest?

Type your initial response to my question in substantially more than eight sentences (minimum 200 words)

Answer 1

Solution

Oligopoly : Indian Cement Industry,Indian Steel Industry,Indian Telecom Industry

Monopolistic Competition : Restaurant businesses and pubs

1.In monopolistic competition market structure,there are many players but there is no competition among them unlike in the case of perfectly competitive market.

Ex: Even though the number of restaurants are huge there is literally no competition between them because there is product differentiation i.e., different restaurant serve the same dishes BUT with different tastes.

In the case of Oligopoly,there are few players in the industry.They may (or) may not produce homogeneous products.

There is no-price competition in this type of market structure and generally the barriers of entry are high due to reasons like high costs associated with investment,product distribution,brand building etc.,

2.In both the kinds of market structure discussed above,they are the market makers and are not price takers as there is no-price competition among the players.

3.Market structure is determined by the number of players and the concentration ratio (which is determined by the market share each player controls)

4.As said above,In monopolistic competition, the products of all the players are differentiated.. So,it works on 100% product differentiation. In Oligopoly, there may(or) may not be product differentiation.It is market structure having the features of both monopoly (in terms of no price competition / pricing power) and monopolistic competition (in terms of product differentiation)

5.Lowest overall profits - Perfectly competitive markets

Highest overall profits - Monopoly

Please give a "Thumbs Up" rating for this solution !!