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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