Download Monopolistic Competition and Oligopoly

Monopolistic Competition and
Oligopoly
In this lesson, students will be able to
identify characteristics of monopolistic
competition and oligopoly.
Students will be able to identify and/or
define the following terms:
Monopolistic Competition
Differentiation
Nonprice Competition
Oligopoly
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The market for jeans is an
example of monopolistic competition.
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Monopolistic Competition
• Monopolistic competition is a market
structure in which many companies sell
similar but not identical products.
• Monopolistically competitive firms sell
products that are similar enough to be
substituted.
• Levi jeans can easily be substituted for
Lee jeans.
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One of these brands
could easily be
substituted for the other
brand.
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Differentiation
• Differentiation occurs when a good is
produced slightly differently from another
good.
• In monopolistic competition, differentiation
is critical.
• Products are similar but not identical. The
not identical part allows for a slightly
higher price but just slightly higher.
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Nonprice competition is using something
other than price to attract customers.
Convenience is an example.
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Nonprice Competition
• Nonprice competition is using something
other than price to attract customers.
• Style, location, and service are examples
of nonprice competition.
• Nonprice competition can help businesses
attract customers.
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Some markets are oligopolies. An
oligopoly is a market dominated by
a few sellers.
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Oligopoly
• An oligopoly is a market in which a few
large firms dominate a market.
• Usually, the four largest firms produce at
least 70 to 80 percent of the market’s
output.
• The government closely monitors oligolies.
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Barriers to entry can lead to oligopolies.
High start-up costs can lead to oligopolies.
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The government
closely monitors
oligopolies because
a market dominated
by a few sellers could
act like a monopoly!
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Perfect
Competition Monopolistic
Competition
Oligopoly
Monopoly
The Four Different Market Structures
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It is important to remember that
competition benefits consumers.
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Questions for Reflection:
• List two conditions of monopolistic
competition.
• How do suppliers use differentiation to
increase their sales?
• What is the difference between
differentiation and nonprice competition?
• List two conditions of an oligopoly.
• Why does the government closely monitor
oligopolies?
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