Referencing Skills and Ethics - Essay Example

Sloman(2010) has pointed out that "Oligopoly occurs when just a few firms between them share a large proportion of industry"(Sloman, 2010, p.135). It is evident from the above definitions that in oligopoly market conditions, the firms are interdependent and hence the decisions taken by one firm about the price and output of their product may affect other firms in the oligopoly setup. OPEC (Organization of Petroleum Exporting Countries) is one best example for oligopoly. On the other hand, monopoly is a market condition in which a person or an enterprise has sufficient control over a particular market, service or product.

For example Microsoft has immense control over the operating system market all over the world and they control around 90% of the OS market worldwide. In other words they have monopolized the OS market and they can determine the price of their product without considering the factors like competition. This paper briefly compares oligopoly with monopoly Firstly, an oligopoly maximizes profits by producing where marginal revenue equals marginal costs (Ison and Wall, 2007, p.150). Moreover, Riley (2006) has mentioned that barriers to entry are high in oligopoly market and “the dominant firms in the long run would maintain supernormal profits” (Riley, 2006).

It is possible for small firms to operate in the proximity of the oligopolistic market, but none of them would be able to make any impacts on the market price and output. On the other hand, in a monopolistic market, it is impossible for small firms to operate because of the total supremacy of the monopolistic firm in the market. Consider the case of Microsoft. No other firms, big or small, so far able to compete with Microsoft because of the absolute monopoly enjoying by Microsoft. Negbennebor & Willis (2001) has pointed out that “there are many barriers to entry in oligopoly market such as economies of scale, patents, access to