What are the differences between monopolies and oligopolies?

Answer 1

Monopoly
A monopoly is an enterprise that is the only seller of a good or service. In the absence of government intervention, a monopoly is free to set any price it chooses and will usually set the price that yields the largest possible profit. Just being a monopoly need not make an enterprise more profitable than other enterprises that face competition: the market may be so small that it barely supports one enterprise. But if the monopoly is in fact more profitable than competitive enterprises, economists expect that other entrepreneurs will enter the business to capture some of the higher returns. If enough rivals enter, their competition will drive prices down and eliminate monopoly power.

Oligopoly
Market situation in which a small number of selling firms control the market supply of a particular good or service and are therefore able to control the market price. An oligopoly can be perfect-where all firms produce an identical good or service (cement)-or imperfect-where each firm's product has a different identity but is essentially similar to the others (cigarettes). Because each firm in an oligopoly knows its share of the total market for the product or service it produces, and because any change in price or change in market share by one firm is reflected in the sales of the others, there tends to be a high degree of interdependence among firms; each firm must make its price and output decisions with regard to the responses of the other firms in the oligopoly, so that oligopoly prices, once established, are rigid. This encourages nonprice competition, through advertising, packaging, and service-a generally nonproductive form of resource allocation. Two examples of oligopoly in the United States are airlines serving the same routes and tobacco companies.

Answer 2

The definition of monopoly is correct in the above answers (a scenario where one firm controls the entire market and sets the price above social equilibrium), but be careful of the definition of oligopoly.

The first answer is actually describing a cartel, an illegal agreement between the members of a market to fix prices at the monopoly level, maximizing profits but hurting consumers.

An oligopoly is actually just a market with imperfect competition due to a limited number of firms in the market. Note that these firms are not colluding or cheating, but the market will not be at perfect equilibrium due to (for whatever reason) the inability for more firms to enter the market, driving the price towards the marginal cost (if it is not there already).

Quite simply, an oligopoly is a situation where only a few firms control the entire market, although illegal activities are not essential for the definition.

Hope that helps.

Answer 3

A monopoly is when one company controls the entire business market. For example, if AT&T was the ONLY long distance phone service provider company in the US and everyone that wanted to use long distance had to use AT&T, they could pretty much set whatever rate they wanted and get it. In a monopoly there is no real competition.
An oligopoly is when two or more companies in a business market get together and work out how to control the market rather than competing against each other. If AT&T and Sprint were the only two long-distance phone service providers in the US, and their management teams sat down together and decided what rates to use and what areas each would control, that would be an oligopoly.

Answer 4

monopoly is when one market has one supplier
oligopoly is when up to 4 suppliers control about 80% of the market (majority of the market)