Question

Describe monopoly and oligopoly and give their proper definitions with the help of examples.

Answer 1

Monopoly is a market situation when there is only seller in the market selling a good that has no close substitute. There are barriers to entry that can be government created i.e. through patents, copyright or it could be because of ownership of the resources, or economies of scale. Presently it is difficult to find a pure monopoly in the market but the power distribution companies, US railway network, pharmaceutical companies selling drugs are some examples.

Oligopoly is a situation when there are few large firms catering to a large market. They are all interdependent on each other for the price and decision making because the goods they are selling is very similar or a close substitute to each other. The example of an oligopoly is Airline industry.