Definitions
- Describing a market structure where a small number of firms dominate the industry. - Referring to a situation where there are few sellers but many buyers. - Talking about a market where firms have significant control over prices and output.
- Referring to a market structure where a single firm controls the entire industry. - Describing a situation where there is only one seller and many buyers. - Talking about a market where there are no close substitutes for the product or service being offered.
List of Similarities
- 1Both refer to market structures where there are few sellers and many buyers.
- 2Both allow firms to have significant control over prices and output.
- 3Both can lead to higher prices for consumers.
- 4Both can result in reduced competition and innovation.
- 5Both can be regulated by government agencies to prevent abuse of power.
What is the difference?
- 1Number of firms: Oligopoly involves a small number of dominant firms, while monopoly involves a single firm controlling the entire industry.
- 2Competition: In an oligopoly, there is still some competition among the few firms, while in a monopoly, there is no competition at all.
- 3Entry barriers: Monopolies often have high entry barriers, making it difficult for new firms to enter the market, while oligopolies may have lower entry barriers.
- 4Pricing power: Monopolies have complete pricing power, while oligopolies have limited pricing power due to competition among the few firms.
- 5Consumer welfare: Monopolies tend to harm consumer welfare more than oligopolies, as they can charge higher prices without fear of competition.
Remember this!
Oligopoly and monopoly are both market structures where there are few sellers and many buyers, allowing firms to have significant control over prices and output. However, the main difference between the two is the number of firms involved. In an oligopoly, there are a few dominant firms, while in a monopoly, there is only one firm controlling the entire industry. Monopolies tend to harm consumer welfare more than oligopolies, as they can charge higher prices without fear of competition.
