Question

Does an oligopoly or a monopolistically competitive firm have a supply curve? Why or why not? Explain with a graph.

Answer 1

The similarities between Oligopoly and Monopolistic competition  is that both are imperfect competition and in both the maket structures the firms have control over the prices.Monopolistic competition combines the features of monopoly and perfect competition.The supply curve is relevant for price taker and not for price maker.Monopolistic firms are price makers.Monopolistic competition does not have supply relation between price and the quantity of output produced.The monopolistic firm does not have a properly defined supply curve due to the fact that output decision of monopolist depends on the marginal cost and on the shape of the demand curve.When the firm faces a downward sloping demand curve,there is no relation between the price that it charges and the quantity sold. So the supply curve is difficult to draw. The Marginal Cost of the curve is not its supply curve.