Site MapHelpFeedbackMonopolistic Competition and Oligopoly
Monopolistic Competition and Oligopoly


Learning Objectives

AFTER READING THIS CHAPTER, YOU SHOULD BE ABLE TO:

  1. List the four distinguishing characteristics of monopolistic competition.


  2. Demonstrate graphically the equilibrium of a monopolistic competitor.


  3. State the central element of oligopoly.


  4. Explain why decisions in the cartel model depend on market share and decisions in the contestable market model depend on barriers to entry.


  5. Describe two empirical methods of determining market structure.

Chapter Summary

Monopolistic competition and oligopoly are market environments between the two extremes of perfect competition and monopoly. Monopolistic competition is characterized by many sellers, firms selling a differentiated product, multiple dimensions of competition, and easy entry of new firms in the long run. It is this easy entry of new firms that reduces the possibility of long-run profit for monopolistically competitive firms. Most real world markets are monopolistically competitive.

The central element of oligopoly is that there are few firms in the industry. Any decision a firm makes must take into account the expected reaction of other firms. Oligopolies can be collusive or non-collusive. Two informal models of oligopoly behavior presented in this chapter are the cartel model and the contestable market model.

To make claims about market structure in real-world markets, economists use a number of empirical estimates, like concentration ratios and the Herfindahl index.

Premium content available for purchase is identified in the left-hand Navigation Menu by the asterisk (*) which precedes the content name. Premium Content on this OLC includes:

    1. iPod Video (Course-wide Content)
    2. iPod Content (Chapter Content)











Colander 8e: EconomicsOnline Learning Center

Home > Chapter 16