firms collude, they form a cartel to reduce output and increase their firms' profitability. Oil companies, grocery stores and some telecommunication companies are examples of oligopolies. Duopoly A special type of Oligopoly, where two firms have exclusive power and control in a market. Both companies produce the same type of product and no other company produces the same or alternative product. The goods produced are circulated in only one market, and no other company intends to enter the market. The two companies have a lot of control over market prices. It is a particular case of oligopoly, so it can be said that it is an intermediate situation between monopoly and perfect competition economy. Hence, it is the most basic form of oligopoly. Monopoly In a monopoly market, there is only one offerer and there is a plurality of buyers; it is a firm with no competitors in its industry. If there is competition, it is mainly some marginal companies in the market, generally accounting for 30-40% of the market share. The decisions of marginal companies will not materially affect the profits of monopolists. The monopolist has market power, that is, it can influence the price of the good. Moreover, a monopoly is the sole provider of a good or service and thus, faces no competition in the output market. Hence, there are significant barriers to market entry, such as, patents, market size, control of some raw material. Examples of monopolies include public utilities (water, electricity) and Australia Post. A monopolist faces a downward sloping demand curve. Thus, as the monopolist raises its price, it sells fewer units. This suggests that when prices rise, even monopolists can drive away customers and sell fewer products. The difference between monopoly and other models is that monopolists can price their products without considering the reactions of other firms' strategic decisions. Hence, a monopolist's: (If marginal revenue equals marginal cost) Output is below the level of a perfectly competitive market; but Price is above marginal cost. Another feature of monopolies is rent seeking, whereby monopoly firms engage in spending money to maintain and exercise its monopoly power. This is undertaken through advertising, lobbying and building excess capacity to deter competitors from entering the market. A firm is a monopsonist if it faces small levels, or no competition in ONE of its output markets. A natural monopoly occurs when it is cheaper for a single