The distinguishing line between oligopoly and monopolistic competition cannot be defined well since the difference between oligopoly and monopolistic competition is not well defined.
Number of firms : a market containing only 4 firms is oligopoly and one with 40,000 firms is monopolistic competition. As the number of firms goes down, the firm's behavior approaches oligopoly and moves away from monopolistic competition.
Market dominance : the dominance of a few firms is oligopoly while too many is monopolistic competition.
Geographic size : the same market form can be monopolistic competition in a city, but oligopoly in a small town. Retail stores in big cities are many. Such a market is monopolistic competition. Smaller towns having fewer shops and stores form oligopoly.
Barriers to Entry : In oligopoly entry is much restricted. Monopolistic competition entry is easier. Start-up costs and material ownership limit entry to different concentrations forming either oligopoly or monopolistic competition. Moreover, these entry barriers can change over time and transform an oligopoly into monopolistic competition or the other way.
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