Monopolies and Oligopolies

Monopoly

• occurs when theres only one seller in the market
• monopolist has market power and will normally sell its goods or services above the marginal cost
• assumptions about markets with a monopolist:
    * monopolist maximizes profits
    * monopolist sets its prices
    * there are barriers to entry and exit
    * there is one firm that dominates the market

Oligopoly/Duopoly

• $oligopoly:$ a market with only a few sellers
    * scale of production for firms is large
• $duopoly:$ there are only two sellers producing goods for the market
• oligopolies have market power
• each firm pricing decision depends on demand curve and production and pricing of other firms in the market
• examples:
    * airplanes: airbus or boeing
    * wireless carriers: Verizon, AT&T, T-Mobile

Monopolistic Competition

• $monopolistic competition:$ a market with many sellers competing against each other selling slightly different products
    * because of many sellers, having market power relies on how different your product is
• more competitors, more substitutes
    * makes the demand more elastic and reduces the firms market power
• examples:
    * monopolistically competitive markets:
      * fast-food restaurants
      * breakfast cereals
      * coffee brands

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