Monopoly and Oligopoly market structures Which do you think

Solution

The oligopoly is the best because in the monopoly market there is a single seller in the market. So the monopoly price will be well above the socially efficeient price, the monopoly charges a price which is above the marginal cost and maximizes the profit. In monopoly there is no different products so the consumers have got no choices available. In oligopoly there are few firms in the market so when it comes to variety the consumer has got better options than in the monopoly. The oligopoly firms also can set a monopoly price and maximize profits but sometimes it is very difficult. So if there is co-operation among the firms the price will be very high and in the oppose the firms reduce the prices to increase the sales. In this case the consumers will be better off.

The increasing competition wiil decrease the monopoly power in the market, so when there is competition the firms will face difficulty in setting prices. In a perfectly competitive market firms are price takers, so increasing the competition will down the price so the people can buy more goods and services and this will adds to the social welfare.