Market Structures

Monopolistic Competition

Monopolistic Competition is when many sellers offer similar products that are not standardized.


  1. With monopolistic competition, there are many buyers and sellers.
  2. With monopolistic competition, there are also many similar but different products
  3. With monopolistic competition, business have limited control of the prices the charge for products.
  4. With monopolistic competition, business are free to enter and exit the marketplace.

Advantages and Disadvantages

(Advantage) There is more freedom to enter and exit the market with monopolistic competition.

(Advantage) There are many different options for consumers to choose from.

(Advantage) The market is more efficient.

(Advantage) Prices tend to be more competitive allowing the consumer to get the best deal.

(Disadvantage) With monopolistic competition can come a lot of waste. Things like packing and advertising can be considered wasteful on certain levels.


Example of an Oligopoly.


An oligopoly is a market structure where only a few sellers offer similar products. An example of an oligopoly is between the cell phone service providers: Verizon, Sprint, AT&T, and T-mobile.

Characteristics of an Oligopoly

  1. Few Sellers and Many Buyers - An oligopoly usually has only a few large businesses that control an entire market.
  2. Standardized or Differentiated Products - Products in a oligopoly are either made using the same manufacturing products or are very similar.
  3. More Control of Prices - There are not that many companies involved with an oligopoly and when they change the price of their product they can have a big effect on their market.
  4. Little Freedom to Enter or Exit Market - It is very difficult for new businesses to join oligopolies for many reasons. Sometimes it's because the margin of profit is too low. Other times it's because of high start-up costs. It all depends on the specific situation.

Advantages and Disadvantages

  • (Advantage) Prices are usually lower than a regular monopoly. However, they still would be higher than in a competitive Market.
  • (Advantage) Prices are usually more stable. Any increase or decrease in price in one business in an oligopoly would cause the other businesses to do the same with their prices.
  • (Disadvantage) There is less product made than in a competitive market and more than in a monopoly.
  • (Disadvantage) It is difficult for a business to join an oligopoly.
Example of a Monopoly


A Monopoly Occurs when there is only one seller of a product that has no close substitutes. There are many different types of monopolies all of which have many different characteristics and advantages and disadvantages.

Characteristics of a Monopoly

  1. In a monopoly, there is only one seller/supplier. The one supplier controls the how much of a product that has no close substitutes is supplied.
  2. In a monopoly, the supplier has control of the prices. They are the price makers because there are no other competitors or substitutes to increase competition.
  3. In a monopoly, the market is heavily restricted and highly regulated. Government regulations and many other things keep other businesses out of the market.

Advantages and Disadvantages

  • (Advantage) In a monopoly, the company with the monopoly will have the ability to invest in research and development more than in other market structures.
  • (Advantage) Having a monopoly also allows for  International Competition which keeps the prices relatively low for consumers.
  • (Disadvantage) Companies can become so large that they prevent competitors from going into the marketplace.
  • (Disadvantage) Consumers in a monopolistic market have very little choices when it comes to what they are going to buy.
  • (Disadvantage) In a monopoly, the company has the ability to charge higher prices because they know consumers will have to buy their products.
  • (Disadvantage) In a monopoly, the company in control has less of a need to compete for your business and is likely to make products of lesser quality.
  • (Disadvantage) In a monopoly, the employees may end up being treated unfairly.

Types of Monopolies

Natural Monopoly

Natural - A Natural Monopoly is a market situation where the costs of production are lowest when only one firm provides output.

Geographic Monopoly - If this store were the only store for miles then it would be a geographic monopoly.
  • Geographic - A Geographic Monopoly is a monopoly that exists because there are no other producers within a certain geographic area.
Technological Monopoly
  • Technological - A Technological Monopoly is a monopoly that exists because the company controls a manufacturing method, an invention, or a type of technology.
Government Monopoly
  • Government - A government Monopoly is a monopoly that exists because the government either owns and runs a business or only allows one producer in the market.

Comment Stream

2 years ago

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2 years ago

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2 years ago

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2 years ago

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2 years ago

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