Question

Please list both a monopolistically competitive industry and an oligopoly (use examples that are not listed in the textbook). Explain how they meet the characteristics of these market structures.

Answer 1

Oligopoly is a market structure where the industry is dominated by a small number of large Firms. These Firms cooperate with each other to benefit as a whole though they're competitors within that specific market.

For example: Automobile manufacturing market is an example of oligopoly, where even if there are small automobile manufacturing companies, the leading companies in the USA are Ford, BMW, Fiat Chrysler who dominates the market. Like oligopoly characteristics, these companies cooperate with each other to increase their Profit and therefore price of cars manufactured by these companies are higher than other small company manufactured cars. Also, entry and exit in this industry is quite strict which is another characteristic of oligopoly.

Monopolistically competitive industry is a market structure where there are large number of small firms operating in this market and each firm produces differentiated product. So each firm has some pricing power and there is low barriers to entry and exit.

For example- designer clothing brands. This is subject to product differentiation and therefore each clothing brand can set their own prices. Also, any brand can enter this market and sell their own designed product without facing much problems.