1. 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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2. The market for jeans is an example of monopolistic competition.
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3. 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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4. substituted for the other
One of these brands
could easily be
substituted for the other
brand.
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5. 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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6. Nonprice competition is using something
other than price to attract customers.
Convenience is an example.
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7. 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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8. Some markets are oligopolies. An oligopoly is a market dominated by
a few sellers.
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9. 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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10. Barriers to entry can lead to oligopolies.
High start-up costs can lead to oligopolies.
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11. The government closely monitors oligopolies because a market dominated
by a few sellers could
act like a monopoly!
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12. The Four Different Market Structures
Perfect
Competition
Monopolistic
Competition
Oligopoly
Monopoly
The Four Different Market Structures
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13. It is important to remember that competition benefits consumers.
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14. 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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