Question

Compare oligopoly, monopoly and perfect competition

Answer 1

Oligopoly:-

• Is a market structure shared by small number of dominant producers or sellers.
• It is a market structure with limited competition.
• This market structure is dominated by only a small number of firms.
• The firms compete with each other or collaborate in order to use their market power to earn more profits.
• They have significant barriers to entry and exit in the market to produce products that are either homogeneous or differentiated.

Monopoly:-

• Is a market structure having a single producer or a firm.
• It is a market structure with no competition as there is only one single firm that controls the entire market.
• The firm in a monopoly enjoys all the market power as consumers do not have any alternatives.
• They have high barriers to entry and exit and produce unique goods.

Perfect competition:-

• Is a market structure consisting of large number of small firms.
• It is a market structure with huge competition as this small firms compete with each other.
• All firms have equal market power and no single firm can influence the market price.
• There are no significant barriers to entry and exit and all firms can enter or exit the market freely.
• All the firms produce identical or heterogeneous goods which introduces high competition.