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 E. Napp

The market for jeans is an example of monopolistic competition. E. Napp

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. E. Napp

substituted for the other One of these brands could easily be substituted for the other brand. E. Napp

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. E. Napp

Nonprice competition is using something other than price to attract customers. Convenience is an example. E. Napp

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. E. Napp

Some markets are oligopolies. An oligopoly is a market dominated by a few sellers. E. Napp

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. E. Napp

Barriers to entry can lead to oligopolies. High start-up costs can lead to oligopolies. E. Napp

The government closely monitors oligopolies because a market dominated by a few sellers could act like a monopoly! E. Napp

The Four Different Market Structures Perfect Competition Monopolistic Competition Oligopoly Monopoly The Four Different Market Structures E. Napp

It is important to remember that competition benefits consumers. E. Napp

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? E. Napp