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Similarities and Differences between Monopolies and Oligopolies

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Similarities and Differences between Monopolies and Oligopolies
Similarities and Differences between Monopolies and Oligopolies

WHAT ARE SOME SIMILARITIES AND DIFFERENCES BETWEEN MONOPOLIES AND OLIGOPOLIES?

According to Mankiw, N. G. (2004) monopolies and oligopolies can be defined as:

Monopolies are based on a market where there are several buyers but only one seller of a product or service whereby the seller sets the price for products and services provided.

Oligopolies are based on a market where there a few companies own or control the production of a product or service whereby the few companies control the market of products and services provided.

Differences:

Monopolies have only one seller.

Oligopolies have at least two or more sellers.

Monopolies offer only one product or service.

Oligopolies offer more than one good or service.

In monopolies the seller can set the price without competition.

In oligopolies the sellers set prices based on competitor prices.

Monopolies usually exceed marginal profits.

Oligopolies usually meet marginal profits.

Monopolies are unable to achieve any level of profit they want due to high prices that reduce consumer purchases.

Oligopolies have a better chance of achieving the level of profit desired because prices are lowered to raise consumer purchases.

Monopolies usually have no close substitute for products or services offered.

Oligopolies usually have a small number of close substitutes for products or services offered.

Similarities:

Both monopolies and oligopolies consist of large organizations

Both monopolies and oligopolies hold considerable market control over specific products and services.

Both monopolies and oligopolies hold specific copyrights for products and services provided.

Both monopolies and oligopolies are affected by increased production in the fact that higher production reduces the price of products and services.

Both monopolies and oligopolies are able to achieve a monopoly on production id specific products or services under copyright.

Both


References: Mankiw, N. G. (2004). _Principles of economics_ (3rd ed.). Chicago, IL: Thomson South-Western. Google (n.d.). Local business results for electric company near Hampton, VA. Retrieved February 6, 2008, form http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4ADBR_enUS207US207&q=electric+company+hampton+VA
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